FEASIBILITY REPORT

ON
INTERNET CAFÉ

Under the supervision of:

Dr. Y. P. Singh

Submitted By:
Piu Chatterjee
PGDM II
Enroll. No:- 1081

International Institute For Special Education

Lucknow
 CONTENTS

Acknowledgement

Preface

1) Project at a glance

2)Working Assumptions

3)Background of the Project

4)Marketing and Technical Analysis

5)Economic and Ecological Analysis

6)Financial Analysis

7)Conclusion

8)Bibliography

ACKNOWLEDGNMENT
A mammoth project of this nature calls for intellectual nourishment,

professional help, and encouragement from many quarters. I would

like to express my gratitude to:

My Professor who taught me Financial Management, without whose

help it would have been impossible for me to do the difficult

calculations in this project.

The persons from whom I collected the data, who gave their valuable

time to provide me information.

My parents to encourage me in doing the project.

PREFACE
The objective of this project is to provide information regarding the
investment opportunities for setting up an Internet Café with focus on
product differentiation, i.e. providing some different services like
video/Audio chat and web developing which are offered by the typical
Internet Cafes in the area of Kalyanpur.

So I thought of taking up the venture of setting up a Internet café

name Web Planet. But for setting up a business venture we need to
check its feasibility, so I can say that the motive of my making this
project is to check the feasibility of my venture.

PROJECT AT A GLANCE
OBJECTIVES

For operating and establishing “Web Planet Internet Café”, I am having some
objectives.
To earn profit at less investments.
To satisfy our customers providing best quality service at effective price.
Providing the service at low cost by providing the best quality at
affordable
price.
To know a fair return on the capital invested by the owner.

MISSION STATEMENT

 To achieve the economies of scale to minimize costs while maximizing

value to Customers.
 To achieve leadership, core and functional competencies internet cafe
business.

NAME OF THE PROMOTER

Piu Chatterjee

ADDRESS
International Institute of Special Education
Lucknow

MOBILE NO.
9389293988

PROPOSED CAPACITY

The proposed project is based on 10 computer systems.

TOTAL PROJECT COST

The total cost of the project is approximately Rs.

NPV
NAME OF THE ORGANIZATION

Name of my Internet Cafe would be Web Planet Cyber Cafe, which would be
located at Kalyanpur, near Jagrani Hospital, Lucknow.

PROPOSED LOCATION

For the Proposed project following premises should be considered.

 Proximity to the majority of people living are from middle income group.
 Proximity to Private hostels setup in different areas of cities.
 Low cost rent.
 High visibility.

WORKING ASSUMPTIONS
1) Project Life ( years) – 5 yrs

2) Equity – 100%

3) No. of Computers – 10

4) Shifts per day – 1

5) Depreciation of computer equipments -20%

6) Depreciation of furniture and fixtures – 20%

7) Internet connection charges for year 1- 1,50,000

8) Connection type – 512 KB

9) Rental – Approximate rent @ Rs. 10000 p.m.

10) The depreciation will be as per WDV( Written Down Value)

method.

11) The Tax is assumed to be 20%.

12) The Salvage value is assumed to be Rs. 213500

13) The Discount rate is assumed to be 20%

BACKGROUND OF THE PROJECT

Web planet Internet Cafe is being promoted by Piu Chatterjee. The promoter of
the company well educated and command experience of the diversified areas in
their projects.
The company will be incorporate to provide internet service, printing, net to
call etc.. The promoter have a considerable knowledge in this field. Besides
having technical and marketing set up, the promoter is financially sound to set
up a project of this scale. All these factors combined together resulted into
making this Internet Cafe a reality.

SCHEDULE OF IMPLEMENTATION

Particulars of Activity Apr May June July Aug

. Incorporation of Company
Acquisition of Land
Computer & other Equipments
Furniture & Fixtures
Arrangement for Power
Internet Connections
Trail Runs

DATE OF INCORPORATION:

The Company will be incorporated on 1October, 2010, with registration

Number………………

TARGET CUSTOMERS

The proposed project intends to cater to students and middle income group
people Furthermore will be a magnet for local and traveling professionals who
desire to work or
check their e-mail massages in friendly environment.
 Students
 Business people
 Middle Income Groups
 Private Hostels
The large student population will become an important part of the Net Café
customer base. The student population continues to grow with the success of the
educational institutes. Evening entertainment, access to the Internet, and the
up- scale ambiance will attract the students. Business community is growing
rapidly with the addition of new companies day by day. Internet café will
provide an
opportunity to local and traveling professionals to check their e-mails
communications, this will be an attracting entity for the Middle income group
and for the residents of private hostels as they do not have ccess to the internet
at their living places.

MARKET NEED
As the popularity of internet continues to grow at an exponential rate, easy and
affordable access is quickly becoming a necessity of life. Public wants access to
the methods of communication and volumes of information now available on the
internet, and access at a cost they can afford and in such a way that they are
not socially, economically and politically isolated.

MARKET TRENDS

More than 90 percent of visitors of these cafes and clubs are youngsters and
their sole objective to get to these is to get enjoyment.

INTERNET CONNECTION

The major cost of an Internet café is the Internet connection. For providing
better
service,
the proposed project will use a High Band width connection for better speed as
the project is going to provide service of video chat. It is recommended that the
Internet connection should be taken from the best Internet service provider.

RECOMMENDED CONNECTION
If the project is set up in area, where DSL Internet connection is available, it is
recommended to use DSL Internet connection instead of a any other Internet
connection.
This will improve the speed of Internet, which will improve the performance of
Video chat and will also reduce the telephone expense.
MARKETING AND TECHNICAL ANALYSIS

MARKETING
Marketing will play an important role in success of the project, as majority of
the
players in the industry are following the strategy of low price with no
differentiation, i.e., they are providing similar services and competing with
each other on the basis of lower prices. It is recommended to follow a different
strategy for the proposed project, which is the product differentiation. For this
purpose, a special service of video chat facility is going to be offered by the
proposed project. To build an image of a reliable and excellent Internet service,
extensive promotion in the locality near the project will be done by use of print
media and billboards.

TECHNICAL ANALYSIS

Equipment Requirement:
Equipment No. Total
Computer 10 2,50,000
Hub 1 6,000
Camera 10 10,000
UPS 1 60,000
Printer 1 7,000
Scanner 1 4,000
Modem DSL 1 8,000
Other Equipments
Networking Cable 350 ft. 3500
TOTAL 348500

Furniture and Fixture:

Equipment No. Rate Total cost
Computer tables 10 5000 50000
and cabins
Computer Chairs 10 2000 20000
Air conditioners 2 25000 50000
Telephone sets 2 1500 3000
Carpet 700 sq. ft 30 sq.ft 21000
144000
Human Resource Requirement:
Network Administrator – 1 person would be appointed @ Rs. 2000 per month.
Annual salary would be Rs. 24,000.

Rent:
Rental – Approximate rent @ Rs. 10000 per month. Annual rent for the shop
would be Rs.1,20,000.

Pre-operating Expenses:-

Rs. 28000

ECONOMIC AND ECOLOGICAL ANALYSIS

The population of daily Internet users is increasing everyday. The importance
of Internet almost equals to that of Telephone. As the population of daily
Internet users are Increasing daily so an Internet café would be a profitable
venture.
As by now we have already understood that an Internet Café in a area like
Kalyanpur would be of a great help for the school going as well as college
going student. As students and professionals might find it to be a really good
idea to find an Internet café at a stone throw distance.

Now let us see the ecological part ; that is also important to consider the
feasibility of my business venture . This includes the environmental aspect of the
business. So for this I can say that an Internet café not only will help to upgrade
the usage of technology for the people residing in this area but also save their
time and problems. Moreover, this business venture will not cause any pollution
and it won’t be harmful for the society as well.

It will be considered with the same esteem as people consider a book store or a
library which will impart knowledge to the society.

FINANCIAL ANAYSIS
The Initial outlay of Rs.640500, out of which Rs. 348500 will be used to buy
Equipments, Rs. 144000 will be used to buy furniture and fixture, Rs. 28000 will
be used for pre-operating expenses and Rs. 120000 will be used against
working capital margin.

Revenue Earned:- Years

Particulars 2011 2012 2013 2014 2015
Internet 665280 712800 760320 807840 855360
Revenue
Printing 133056 142560 152064 161568 171072
Web - - 5000 7000 9000
development
Revenue
TOTAL 798336 855360 917389 976408 1035432
REVENUE

Operating Expenses:-
Years
Particulars 2011 2012 2013 2014 2015
Internet 150000 148500 147015 145545 144089.50
Connection
charges
Printing 66528 71280 76032 80784 85536
charges
Web - - 2500 3500 4500
development
Machine 20000 28000 30000 32000 34000
maintenance
Direct 137553 119766 129217 138668 148118
Electricity
TOTAL 374081 367546 384764 400497 416243.50

Depreciation Chart:-
WDV method (@ 20%)
Particulars Opening balance Depreciation Book Value
0 492500 98500 394000
1 394000 78800 315200
2 315200 63040 252160
3 252160 50432 2021728
4 2021728 40345.60 161382.40
5 161382.40 32276.48 129105.92

Project Cash Flow

Particulars 0 yr 1st yr 2nd yr 3rd yr 4th yr 5th yr
2010 2011 2012 2013 2014 2015

A. Preliminary & (28000)

pre-operating
expenses
B. Capital assets (492500
)
C. Working (120000
capital margin )
D. Revenue 79833 855360 91738 976408 1035432
6 4
E. Operating 37408 367546 38476 400497 416243.50
expenses 1 4
F. Depreciation 98500 78800 63040 50432 40345.60
@ 20%
G. EBT {D-(E+F) 32575 409014 46958 525479 578842.90
5 0
H. Tax 65151 81802.80 93916 105095.8 115768.58
@20% 0
I. PAT(G-H) 26060 327211.2 37566 420383.2 463074.32
4 0 4 0
J. Salvage value 213500
K. Recovery of 120000
WMC
L. Initial (640500
Investment(A+ )
B+C)
M. Operating cash 35910 406011.2 43870 470815.2 5003419.9
flow(I+F) 4 0 4 0 2
N. Terminal Cash 333500
Flow(J+K)
O. Project Cash 35910 406011.2 43870 470815.2 5336919.9
inflow 4 0 4 0 2
Pay back Period:-
 Years Cash Flow
0 (640500)
1 359104
2 406011.20
3 438704
4 470815.20
5 83691.92

Calculation-

406011.20 – 12 months
281396 - 12 / 406011.20 *281396 ( 640500-359104=281396)
= 8.316 months
= 1 yr 8 months and approximately 10 days.

AAR calculation:-

Average cash flow

AAR= *100
Initial Investment

= 351665264/ 640500*100
= 54.90%

NPV Calculation:-

NPV = PV (benefits)- Investments

Cost of the Project = Rs. 520500

Discount Rate = 20%
NPV =
359104*PVIF(20%,1)+406011.20*PVIF(20%,2)+438704*PVIF(20%,3)+470815.20*PVIF(
20%,4)+83691.92*PVIF(20%,5)
=299133.63+281771.77+254009.61+226932.92+33644.15
=1095492.07

NPV = 1095492.07 – 520500

= 574992.07

If the NPV is positive then the project is to be accepted.

CONCLUSION
 After making this report I have faced real environment stress in real
business. This research work has enabled me to gather a lot of
information about the café business and I have been able to apply my
classroom knowledge to the practical life very effectively.
In conclusion, from the above Projected Balance Sheet, Projected
Income, Projected Cash Flow and other major financial analysis and
calculations it can be said that the project is very much feasible,
having good profitability, conceived by the people already
experienced in the similar field.

BIBLIOGRAPHY
Data collected from existing Internet cafes and Various
other people related to the sales of equipments and
other fixtures required for the business.
Financial management Book of Mr. Prasanna
Chandra.