There are several ways to evaluate a financial project. Sometimes it takes a bit of time to review every detail of a financial project. In the first instance, it is important to present the investor with an executive summary that contains the information necessary to make a decision. However, a complete evaluation of the project must first be done. The idea of the summary is that the investor spends little time in the review and gets much of the information.
Introduction.
The present work tries to give a proposal of executive summary indicating the most important financial indicators applied to a project of a Montessori type school. The project is considered for children where their family has a medium-high economic level (60%) and for children with low resources (40%). Also, the project must generate a level of profit in such a way that the business is sustainable and that low-income children do not pay tuition. For practical purposes, the data and calculations in this work will be estimated.
Definitions.
Net present value (NPV). “It is the most developed technique of capital budgeting. It is calculated by subtracting a project's initial investment from the present value of its discounted cash inflows at a rate equal to the company's cost of capital. " (Gitman LJ, 2012).
The internal rate of return (IRR). “It is the discount rate that equals the NPV of an investment opportunity with $ 0 (because the present value of the cash inflows equals the initial investment)” (Gitman LJ, 2012).
Recovery period. "It is the time required for the company to recover the initial investment" (Gitman LJ, 2012).
Gross profit margin. "It measures the percentage that remains of each dollar of sales after the company paid for its goods" (Gitman LJ, 2012).
Operating profit margin. “It measures the percentage that remains of each dollar of sales after all costs and expenses are deducted, excluding interest, taxes, and preferred stock dividends; the “pure” profits earned for every dollar of sales ”(Gitman LJ, 2012).
Net profit margin. “It measures the percentage that remains of each dollar of sales after all costs and expenses have been deducted, including interest, taxes, and preferred stock dividends” (Gitman LJ, 2012).
Return on investment. "It measures the integral effectiveness of the administration to generate profits with its available assets" (Gitman LJ, 2012)
What aspects should be considered in an executive summary?
Project introduction. A brief writing is made of what the business, the product or the service that is proposed to offer to society is about, as well as the purpose of the project. Also, data about the market where the product or service is going is mentioned.
Costing of the service and allocation of the price. In this aspect, the cost and the sale price are defined.
Determine the total initial investment. The costs are determined to start the project and be able to sustain it for a certain time as sales are generated.
Show the main indicators of the project evaluation such as prime cost of sales, gross profit, NPV, IRR, PRD, gross profit margin, operating profit margin, net profit margin and ROI.
Executive summary application in Montessori school.
Continuing with the previous structure, some calculations and data are proposed for the Montessori school project.
School X type Montessori
Education is a pillar for the development of our society that instills both values and knowledge in each new generation of children. Unlike traditional schools, Montessori education has a method that makes the child think and use their logic. Arouse curiosity and generate scientific thinking. Another characteristic of these schools is that they mix in a group of different ages. In pre-primary school, children from 3 to 6 years old attend, in primary there is a group of 7 to 9 years old and the third group is made up of children from 10 to 12 years old. The Montessori method uses materials indicated for each age, putting a certain degree of difficulty according to the child's maturity.
According to INEGI (2015), in the municipality of Puebla, there is a population of 1,799,744 children between 0 and 14 years old, of which 31.93% are discarded, corresponding to children between 0 and 2 years old and 13 to 14 years, leaving only the range of children from 3 to 12 years, that is, 1,225,086 children as a potential market. Hence, it is considered that 70% have an interest in the educational offer, reaching an available market of 857,560 children. With the project, it is planned to cover only 0.063% of the available market, resulting in 540 tuition fees per year. Distributed in each monthly with 8.33%, they would be45 tuition fees per month. (See following table).
Monthly sales (1 year)
| Month | % | Units | P. Vta | Total |
| January | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| February | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| March | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| April | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| May | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| June | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| July | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| August | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| September | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| October | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| November | 8% | Four. Five | $ 5,434.48 | $ 244,670.42 |
| December | 8% | Four. Five | $ 5,434.48 | $ 244,671.59 |
| 100% | 540 | $ 2,936,046.20 |
The purpose of this project is to offer a high quality education to children who come from families with a medium-high economic level (60%) and to low-income children (40%). For this, it is planned to have 3 groups of 25 children each, as shown in the following table.
| Group | Age | Economic level Medium-high economic level 60% low resources 40% | Total | |||
| 1 3-6 years | fifteen | 10 | 25 | |||
| 2 7-9 years | fifteen | 10 | 25 | |||
| 3 10-12 years | fifteen | 10 | 25 | |||
| Total | Four. Five | 30 | 75 | |||
The table above shows 45 children who would pay tuition and 30 children who would have a scholarship. And, on the horizontal lines, it is shown that each group would have 25 children.
Costing and pricing.
The following costs are considered for the project:
| Personal | Integrated salary per month per person | Salary integrated to the total month |
| 3 teachers | $ 13,797.00 | $ 41,391.00 |
| 1 quartermaster person | $ 5,518.75 | $ 5,518.75 |
| 1 secretary | $ 8,278.17 | $ 8,278.17 |
| 1 director | $ 27,594.08 | $ 27,594.08 |
| 1 counter | $ 17,936.08 | $ 17,936.08 |
| 1 maintenance | $ 16,666.67 | $ 16,666.67 |
| $
89,790.75 |
$ 117,384.75 |
Total
Number of students 45
Unit cost $ 2,608.55
| Prime cost of sales | 48% $ 2,608.55 | |
| Desired gross profit of the project | 52% $ 2,825.93 | |
| Tuition price | 100% $ 5,434.48 |
Initial investment.
In order to start the project, an initial investment of $ 6'094,011.26 is needed. This amount will be invested in the following aspects:
NET WORKING CAPITAL:
| + Cash (equivalent to 3 months of sales) | $ 734,011.26 |
| = Net working capital | $ 734,011.26 |
|
NON-CURRENT ASSETS: |
|
| Office team | $ 50,000.00 |
| Intangibles | $ 10,000.00 |
|
Other assets: |
|
| Constitution expenses (land and construction) | $ 5,100,000.00 |
| Stationery and consumables | $ 200,000.00 |
TOTAL INITIAL INVESTMENT $ 6,094,011.26
To start the school's operations, funding will be sought through a company that collects donations or sponsors who want to participate in this social project.
Indicators.
Net present value (NPV). The NPV of this project for the first 10 years is
$ 4'800,517.51.
Internal rate of return (IRR). The annual yield for this case is 29.91%. Period of payback. The time that will elapse to recover the investment taking into account the cash flows will be from the sixth year.
Gross profit margin. The percentage of profit after paying for your goods is 52%.
Operating profit margin. The percentage of earnings before paying taxes, interest and dividends is 35.97%.
Net profit margin. The percentage of earnings after paying taxes, interest and dividends is 39.63%.
Return on investment. The return on the investment is 13.27%.
Conclusion.
With this executive summary proposal, a presentation of the most important data of the investment project applied to a Montessori-type school can be made. In a short time, the investor can get a clear idea of the profitability of the project. Also, it is observed that the project is profitable and sustainable, so it could contribute to education for low-income children.
Bibliography.
Gitman LJ (2012), “Principles of financial management”, twelfth edition, Pearson Educación de México, SA de CV INEGI 2015 obtained from
cuentame.inegi.org.mx/monografias/informacion/pue/poblacion/comotu.aspx
