Feasibility: Net Present Value and Market Share

The coffee shop is a simple familiar idea where you can enjoy your time with a nice and unique taste of coffee from the marvelous farms in Colombia in South America. The shop is a cozy relaxing place where people will differentiate the kind of high quality of coffee beans. Coffee shop business is so familiar everywhere and specially the Kuwaiti market and our project will be as one of these shops. The Project will be different from what is available in the market due to the unique type of coffee that will be supplied from the franchiser.

The franchiser will supply us with the inventory the whole year period. The cafe will have a menu similar to what is available in the competitors’ menus, hot and cold drinks. Also, the cafe will offer some desserts like cup cakes, muffins, cookies, etc and some light food like sandwiches and salads that are suitable for snack. Starting the project, we surveyed 180 people from both genders and different occupations. The survey was held using a questionnaire consists of 17 questions. Our respondents were mainly university students and employees.

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We mainly focused our questions on how much people are willing to pay and visit the shop and what is their favorite coffee shop they used to buy from. In the process of calculating the number of visitors and the market share we used the annual report of the Ministry of Planning. We used the numbers and figures we obtained from the survey to estimate the sales by estimating price, number of visitors and the expected market share. For the coming years, our sales is expected to increase by the inflation rate.

Moving to numbers and analysis, we used capital budgeting tools with some other tools that help in making the decision. The figures we got is encouraging, starting with a promising positive NPV with IRR and MIRR higher than the cost of capital (WACC) we used. Moreover, the discounted payback period is less than the project life we assumed as well as the profitability index is more than one. All these indicators lead us to one decision that is to go ahead with the project.