Investment proposal

PROPOSAL FOR INVESTMENT
1. Type of business (briefly describe the business in terms of products, customers,
and key process):
2. Competitive Strategy Options (what segments of the business/generic strategies
are available):
3. Recommended Strategy (which segment is recommended and why):
4. Investment Request:
5. Investment Detail:
a. Capital Expenditures (equipment)
b. Raw Materials
c. Cash for operations
d. Others
6. Profit and Loss Projections:
 provide at least 5 year projections of unit sales, price and revenues;
 state assumptions in terms of size of market, growth, and market share target;
 Describe product, product mix, and gross margin targets.
7. Cost Projections:
 Provide at least 5 year projections of unit cost of sales, preferably with
breakdown by raw material and labor.
8. Cash Flow and IRR
 provide cash flow projections based on Capital Expenditure plan, revenue and cash
projections;
 Compute IRR assuming exit at end of 5 years.
9. Opportunity (is) and financial impact (list and briefly describe opportunities and
estimate of impact on gross income and/or IRR computations for each
opportunity):
10. Threat(s) and financial impact (list and briefly describe opportunities and
estimate of impact on gross income and/or IRR computations for each threat):
11.What must company do well to meet projections:
12. Recommended actions to mitigate threat(s) and/or opportunity (is):
13. . Justification:

Project Manager(s):
________________________
________________________
_________________________
MIC Comments:

Financial Statement Detail
Cash
Raw Material Inventory
Finished Goods Inventory
Total Inventory
Equipment
Purchase price
Less accumulated depreciation
Equipment net of depreciation
Total Assets
Sales
Cost of Sales
Gross Profit
Overhead
Net Profit before depreciation
Depreciation
Net Profit
Operating Margin
Turnover
ROA
Project rate of return (actual)

GUIDE for Preparing Proposal to Invest (PIN)
This set of procedures is intended to enable project managers and the
Management Investment Committee (MIC) to properly evaluate investment
opportunities. These procedures define what information should be presented to the
MIC to enable it to judge the attractiveness of an investment proposal and in what form
the information should be presented. In a subsequent document, the information and
form for a Post Audit Review (PAR) will be described. This will be required when an
investment it has run its course.
The company prefers to invest in a business project over a period of between 5-
to-10 years, find an exit mechanism, and move on to other projects. They believe this is
long enough to allow their project managers to establish sound business practices,
develop as business managers, while providing the company opportunities to pursue new
opportunities. The PIN is intended to provide the MIC information necessary to make an
investment decision. The PAR provides the opportunity to evaluate a project at exit
time. The company believes that these practices have contributed to its achieving an
internal rate of return of 10% for its investment portfolio.
The project manager must address the following:
1. Is the investment profitable? This will be based on an estimate of the project’s
internal rate of return.
2. What competitive strategies are available? What strategy does the project
manager recommend the company pursue?
3. What should the company do well to succeed?
4. What risks and opportunities are apparent? Explain and the major risks or
opportunities and describe how these may affect the profitability of the
investment.
If approved, the assumptions the project manager used in deriving the project’s
internal rate of return, such as amount to be invested, investments in fixed assets,
sales, cost of sales, profit, etc. will become the objectives for the business. At exit,
the actual financial performance of the project will be compared to these targets.
As you review the Sample, note a few financial items that are necessary in evaluating
the financial attractiveness of a project.
a. OVERHEAD. There should be an amount set aside for rent (of the store location),
depreciation (assume the “store” itself to be made up of mostly equipment),
salaries of a couple of store helps (selling and general administration), etc. For
simplicity, use the following rough estimates for OVERHEAD:
a. For the Old Town Store, $65,000 per store
b. For the Free Standing Store, $55,000 per store

b. DEPRECIATION. Included in the OVERHEAD charge is depreciation. Since the
“stores” are mostly made up of equipment, you may assume a 5 year depreciation
rate.
We omit for this version of the game any consideration of taxes other than levies
and the like which may be imposed by the Economic Council of the Beaver Republic.

Investment proposal

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Investment proposal