A DETAILED BUSINESS PLAN

OF DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY (DIIT) SUBSIDIARY OF

DATA-POINT MICRO SYSTEMS LIMITED (DMSL (ACCRDITED TRAINING CERTRE BY EC-COUNCIL UNIVERSTY)
34, KUDAISI STREET, OFF APAPA OSHODI EXPRESSWAY APAPA, LAGOS STATE, NIGERIA Website: www.datapointonline.com.ng E-Mail: info@datapointonline.com.ng PHONE NUMBERS; 01-7614402 and 08039262657

SUBMITTED TO THE BRANCH MANAGER DIAMOND BANK NIGERA PLC IBAFOR APAPA, LAGOS STATE, NIGERIA SEEKING FOR:
TWO MILLION NAIRA TERM LOAN FACILITY REQUIRED FOR EDUCATIONAL BUSINESS EXPANSION ICT EGUIPMENT PROCUREMENT AND WORKING CAPITAL.

PREPARED BY: DATA-POINT MICROSYSTEMS LTD (Certified Information Security Consultants) 34 kudaisi street, Olodi Apapa Lagos State GSM PHONE NOS: 01-7614402, 08039262657. Email: datapointcomputers@yahoo.com MAY 2011.
1

TABLE OF CONTENTS CHAPTER I 1.1 1.2 1.3 1.4 1.5 1.6 II 2 .1 2.2 2.3 2.4 2.5 2.6 III 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 IV THE INSTITUTION-DIIT The Background and Profile The vision and Mission The Corporate Banker(s) Business Plan Purposes Socio-economic Contribution Government Support and incentive MANAGEMENT AND ORGANIZATION STRUCTURE Ownership and Board of Directors Management Profile Organization Chart Staff Requirements Actual Staff Salary Structure Budgeted Costs of Operations MARKET ANALYSIS AND FORECAST Services/Courses offered and Certificates Awarded. Target Markets Advertisement Pricing objectives Competitors and Competitive Strategy Innovations and Special Attributes Critical Success Factors (CSFs). Actual, and Projected, Students Enrolment Capacity SWOT Analysis Summary FINANCIAL ANALYSIS AND FORECAST
2

TOPIC EXECUTIVE SUMMARY

PAGE

3 4 4 4 4 4

5 5 6 7 7 8

8 9 9 9 9 10 10 11 11

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.8.1 4.8.2 4.8.4 4.9. V 5.1 5.2

Loan Facility Needs Analysis Financing Plan Sales Revenues Forecast Profit and Loss Accounts Budget Balance Sheet Budget Cash Flow Statement Budget Assumptions Risk Analysis Return on Investment (ROI) Net Present Value (NPV) Sensitivity Analysis (SA) Notes on the Accounts CONCLUSIONS AND RECOMMENDATION Summary of Findings and Conclusions Recommendation

12 12 13 14 15 15 16 16 16 17 17 17 18

4.8.3 Profitability Summary (PS)

20 20

APPENDIX LIST

DATA POINT INSTITUTE OF INFORMATION TECHNOLOGY EXECUTIVE SUMMARY 1. 2. This report covers three (3) years of business operations of the institute, DataPoint Institute of Information Technology (DIIT). DIIT is a subsidiary of the parent company, Data-point Micro Systems Ltd, (DMSL). RC No: 481145, incorporated in Nigeria on the 15th day of May, 2003 under Companies and Allied Matters Act 1990. The parent company has authorized share capital of N 200,000 (Five Hundred Thousand Naira) divisible into 500,000 ordinary shares of N 1 each. DMSL is a limited liability company and the liability of its members is limited by shares. DIIT is a major player not only in I.T training and ICT consultancy services, but also in the Solar Energy, Power Solutions, printing and publishing industry. DIIT is a member of the following professional associations: Member, Computer Professionals Registration Council of Nigeria (MCPN). Member, Computer Society of Nigeria (MCSN) Member, Nigeria Association of Small and Medium Enterprises (NASME) See Appendices B1, B2, B3. DIIT was the winner of the Regional and Continental prestigious Awards in 2004, and 2010, respectively. That is: The best ICT training Institute Award of the year, 2004, by the Commoners News Paper... The Outstanding ICT Training Institute Award of the year, 2010, by African CEO Council. DIIT has four major campuses at Lagos State, and FCT Abuja. Website: www.datapointonline.com.ng. E-Mail Address: info@datapointonline.com.ng. Phone No: 01-7614402 and 08039262657 DIIT also venture into Primary and Nursery School with uncompleted school building and Ten flats of two bed room each in Alagbadon area of Lagos. DIIT current actual enrolment capacity is 920 (Nine Hundred and Twenty) Students. DIIT actual total annual sales revenue amounted to N30, 800,000 (Thirty Million and Eight Hundred Thousand Naira) only. DIIT have current work force of twenty-two (22) Academic and NonAcademic Staff.
4

3. 4. 5. 6. a. b. c. 7. a. b. 8. 9a b. c. 10. 11. 12. 13.

14. a. b. c. 15.

The proposed financial structure is: Equity N 95 Million Debt (Applied Loan) N 2 million Total company value N 100 million Some selected financial highlights and ratios indicators are: Description: Yr 1 Yr 2 Yr 3 N000 N000 N000 Sales Revenue 46,360 54,589 65,976 Net Profit 18,655 24,018 31,826 Gross Profit Margin 85% 85.3% 87% Net Profit Margin 40.2% 44% 48.2% Return on Investment (ROI) 32% 48% 78% Net Present Value (NPV) @ 8% = N18, 465,050 and @ 15% = N7, 955,966 DIIT has graduated more than Ten Thousand (> 10,000) students since inception. The Loan Guarantor is: Mr. Lucky O. Uduikhue, MD/CEO, Data-Point Micro Systems Ltd.

a. b. c. d. e f. 16. 17.

CHAPTER I THE INSTITUTE - DIIT 1.1 The Background and Profile Data-Point Institute of Information Technology (DIIT) is a Subsidiary of Data-Point Micro Systems Ltd (DMSI), Arc. No. 481145, legally incorporated in Nigeria on the 15th day of May, 2003, under the Companies and Allied Matters Act 1990. The Parent company, DMSL, has authorized share capital of N500, 000 (Five Hundred Thousand Naira) divisible into 500,000 ordinary shares of N1 each. DMSL is a limited liability company, and the liability of its members is limited by shares. DIIT provides not only I.T training, and ICT consultancy services, but also awards proficiency certificate as well as Diploma and Advance Diploma certificates in specialized areas. Besides, DIIT is the publishers of the Contact Business Magazine, and the Contact Sports News paper, which are circulated nationally and widely read by many people. DIIT is a member of various reputable professional associations, supra, and the winner of the Best ICT Training Institute Award of the year, 2004, 2006, 2009 and the outstanding ICT Training Institute Award of the year, 2010, respectively. DIIT campuses are strategically located are: 1. 2. 3. 4. Apapa Campus: 34, Kudaisi Street, Off Apapa Oshodi Express Way, Apapa, Lagos State. Olodi Campus: 2, Ojoku street, off New Road Bus Stop, Olodi Apapa, Lagos State. Ajegunle Campus: 61/65, Cardoso Street, Ajegunle, Apapa, Lagos State. Abuja Liaison Office: 401 Road, 4th Avenue, A close, Kubwa, Abuja Federal Capital Territory (FTC). DIIT have professionally qualified I.T Instructors, well equipped ICT laboratory, fully air conditioned class rooms, standby generators, recreational facilities, library and research materials, and conducive learning environment where the value for money is quantified and justified.

1.2

The Vision and Mission: Our vision is to foster the ICT training and development of human capital

1.2.1 Vision: aimed at creating mass employment opportunities for the youths. 1.2.2 Mission: Our Mission is to maximize the shareholders wealth in the long-rum. 1.3 1. 2. 3. 1.4 1. 2. 1.5 1. 2. 3. 4. 5. 6. 7. 8. 1.6 1. 2. 3. The Corporate Bankers: First Bank Nigeria Plc, Trinity Branch Apapa, Lagos State, Nigeria. Diamond Bank Plc, Trinity Branch Apapa, Lagos State, Nigeria. United Bank for Africa plc, Ibafor Apapa, Lagos Nigeria The Business Plan Purposes are to: Assist DIIT Management to obtain financing. Serve as a tool or reference point for evaluation of the plan progress. The Socio-economic Contributions Include: Human Capital Development. Generation of mass employment opportunities. Eradication of computer illiteracy in Nigeria. Youth empowerment. Alleviation of Poverty Contribution to the Gross National Product (GNP). Combating of crimes in the society. Improvement of the standard of living of the citizens. Government Support and Incentives Include: CBN Credit Guarantee Scheme for the private educational institutions. Provision of the basic infrastructure to attract investment. Police security for protection of life and property
7

4.

Fiscal incentive in the form of tax shelter.

CHAPTER II 2.0 2.1 MANAGEMENT AND ORGANIZATION STRUCTURE Ownership and Board of Directors DIIT is wholly owned, operated, managed and controlled by Nigerians. Members of the Board of Directors/Management are:

2.2 2.2.1 1. 2. 3. 4. 5. 6,

Management Profile Magistrate W. A. O Meigbope is the Chairman, Board of Trustees, Magistrate W. A. O Meigbope, Chairman, Board of Trustees. Mr. Lucky O. Uduikhue, Director of Studies/CEO. Mr. Uduikhue Eric, Director, B.sc Economics M r. Uduikhue Smart, Director. B.sc Mathematic/ Statistics Mrs. Uduikhue Stella, Head, Business Development, B.Sc Computer Science Miss Olubunmi Daniel, Secretary/ Head Administration HND, Business Administration

Data-point Institute of Information Technology

Magistrate W. A. O Meigbope is the Chairman, Board of Trustees. He is a holder of HND in Public Administration from Institute of Management and Technology (IMT) Enugu; AIM Certificate from Institute of Bankers Lombard, London; B.sc. (Hons) degree in Business Administration from Lagos State University, and LLB (Hons) degree from University of Lagos.
8

He has worked in several reputable organizations including Mobil Nigeria Plc, United Bank for Africa Plc, and Dam Ayo Chambers where he held senior management positions. Presently, he is the Magistrate, Lagos State Judiciary High Court, Ikeja, Lagos State. Magistrate W. A. O Meigbope has made substantial financial contributions for and immense personal sacrifice/commitment to the growth of DIIT. 2.2.2 Mr. Lucky O. Uduikhue is the Founder and Managing Director / CEO of

DMSL, and the Director of Studies / CEO of DIIT. He is also the Founder and president of Nigeria Youth Initiative for Better World International; and the Publisher and Editor-in-Chief of the Contact Business Magazine, and the Contact Sport News Paper. Mr. Uduikhue is a holder of B.sc degree in Computer Science from University of Lagos, (PGD Education) in view from National Open University Lagos and M.Sc degree (In-view) in Information Security Science from EC Council University India. Professionally, he is a Certified Ethical Hacking (CEH) and Certified Information Security Analyst (ECSA) and Computer Cyber Hacking and Forensic Investigator (CHFI) and Licence Penetration Tester (LPT) from EC Council University, India. Mr. Uduikhue is a professional India IT Training professional and Member of the following Professional Associations: 1. 2. 3. 4. 5. 6. 7. 8. Member, Computer Society of Nigeria (MCSN) Member Chartered Nigeria Institute of Management (CNIM). Member, Nigeria Association of Small and Medium Enterprises. (NASME) Member, Fate Foundation. Member, Full Gospel Businessmen Fellowship (FGME) Member, African CEO Council. (ACC) Member, Police Community Relations Committee (PCRC). president and Founder, Nigeria Youth Initiative for Better World IntL. Mr. Uduikhe is a visionary Technocrat, an innovative Entrepreneur, a seasoned Systems Engineer, a professionally qualified ICT Security Consultant, a distinguished Industrialist, an accomplished Philanthropist, and a successful Corporate Management
9

Executive with more than fifteen (10) years of experience in the ICT industry. He is a devoted Christian, God fearing, hardworking, honest, and happily married.

2.3

DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY ORGANIZATIONAL CHART FUNCTIONAL STRUCTURE

Board of Trustees

Director of Studies / CEO

Secretary

Accounts Dept.

Admin. Dept.

Academic Dept.

Marketing Dept.

Publishing Dept.

Admission & I CT DIIT is strategicallyT. organized into five major functional areas of Bursary Accounts, I . Training Library Records Laboratory Administration, Academic Admission & Records, I.T Training, ICT Laboratory, z

Library, and Bursary), Marketing and Publishing departments to ensure: 1. 2. 3. 4. 5. 2.4 2.4.1 Efficient resource allocation. Ease of functional co-ordination In-depth development of expertise. Specialization of Labour. Maximum output performance. Staff Requirements Current Labour Force A total of Twenty-two (22) trained, skilled, professionally qualified and technically competent Academic and non-academic staff with B.sc, MSc, MCSE,
10

B.Eng; PGDE, HND, ND, WASC, NCE and GCE from reputable institutions are currently employed at DIIT.

2.4.2 Current Staff Analysis: No. of Staff 1. 2. 3. 2.4.3 1. 2. Permanent Academic Staff Permanent Non-Academic Staff Total Number of Current Staff Additional Staff Required: Eight (8) additional Staff is required to effectively run D11T. This includes: Academic Staff Non-Academic Staff 5 3 = 30 Staff Strength = = = 15 7 22 Work Force

Total Current and additional staff required 2.5 Current Annual Staff Salary:

N4, 145,000 (Four Million, One Hundred and Forty-Five Thousand Naira) per annum.

2.6 2.6.1

Budgeted Cost of Operations: Direct Materials Cost Budget: N2,058 Million in year one, N2,367 Million in year two, and N2,485 Million in

year three for educational, printing and publishing materials. 2.6.2 Direct Labour Cost Budget: N5,145 Million in year one, N5,660 Million in year two, and N6,226 Million in year three respectively. 2.6. 3. Administrative & Selling Overhead Cost Budget:

11

N2,207 Million in year one, N2,428 Million in year two, and N2,549 Million in year three for office salaries of the non-academic staff, marketing and overhead expenses respectively. selling

CHAPTER III 3.0 3.1 1. 2. 3. 4. 5. MARKET ANALYSIS AND FORECAST Services/Courses offered and Certificates Awarded I. T. Training (Educational Service). Printing & Publishing ICT Consultancy Services Energy & Power Solutions Services Nursery & Primary School

3.1.1 Services Offered

3.1.2 Courses Offered include: 1. 2. 3. 4. 5. 6. Web Application Design. Data Management Technology Computer Technology Computer Ethical Hacking Data base Management 7. 8. 9. 10. Desktop & Graphic Technology Computer Engineering AUTOCAD Microsoft Certifications Peach tree Accounting

Internet Technology (e-Business) 11.

12. VB, JAVA, C++Programming Languages.

3.1.3 1. 2. 3. 4. 3.2

Certificates Awarded include: Proficiency Certificate Professional Certification Diploma Certificate Advance Diploma Certificate Target Markets:

12

Youths, Students, Graduates, Civil Servants, Entrepreneurs, Investors, Analyst, Professionals, Government Agencies, and Corporate Organizations.

3.3

Advertisement Bill Boards, Business Magazines, News Papers, Websites such as Face book,

Twitter, Link in, Hand bills, Posters, Radio Jingles, and Television advertisement methods are used to create public awareness about DIIT I.T Training Programmes and allied products/services. 3.4 1. 2. 3. 4. 3.5 3.5.1 1. 2. 3. 3.5.2 Pricing Objectives DIIT Pricing Objectives are intended to: Maximize the current sales revenues. Recover sufficient cash early enough to pay off operating expenses. Maximize the shareholders wealth in the long-run. Sustain the growth of DIIT as a going concern. Competitors and Competitive Strategy Competitors The major competitors of DIIT are: AP Technology Jidaw Systems Net Solutions Competitive Strategy: DIIT Management adopts Cost Leadership Competitive strategy. We provide high quality I.T training, publication, and ICT Consultancy and Power solutions services at lower unit cost of operations than our competitors. 3.6 Innovations and Special Attributes
13

4. 5. 6.

NIIT

Computer Warehouse Training. New Horizon Systems, etc.

3.6.1

Innovations: DIIT designed, installed and implemented e-learning Programme called Data-Point Net City online Training where:

1. 2. 3. 3.6.2 1. 2. 3. 4. 3.7 1. 2. 3. 4. 5. 6. 7. 8.

Students are trained online by the best professionally qualified I.T and ICT Instructors. Students are exposed to vast research materials from different libraries around the world. Students are able to communicate easily through internet. Special Attributes include: Distinctive Performance in professional Certification examinations by DIIT graduates. Excellent moral character by DIIT students/graduates Winner of the Prestigious Regional and Continental Awards in 2004, and 2010. Higher output performance on the Job by DIIT trained staff. Critical Success Factors (CSFs) Balanced and Complete Curriculum Qualified I. T. Instructors Well equipped ICT Library and Laboratory The safety of students. Conducive learning environment Uninterrupted Power supply standby generator. Good structures, and fully air conditioned classrooms. Goodwill and reputation of the school management

The key CSFs in the ICT training industry include:

DIIT have met and is poised to surpass these expectations.

3.8 Students Enrollment Capacity: 3.8.1 Actual Students enrollment capacity:

14

Nine Hundred and Twenty (920) Students are currently enrolled in the different programme offered by DIIT. The analysis of the students distribution shows:
1 Programme Duration 3 Months 4 Months 6 Months One Year Total

2 Number of Students

350

100

350

120

920

3.8.2 Projected Students Enrollment Capacity The projection is predicated on the recent market survey, and upon the baseyear or current actual students population of DIIT. Therefore, the students current enrollment capacity is estimated to increase by 40% in year one, 45% in year two, and by 50% on year three. This represents a total of 1288 students in year one, 1335 students in year two, 1380 students in year three, and a combined total of 4,002 students for the three years under review as tabulated below:
S/N Programme Duration Actual Nos. 1 Three (3) Months 350 2 Four (4) Months 100 3 Six (6) Months 350 4. One (1) Year 120 5 Total Enrollment 920 *** Nos: = Number of Students Yr 1 Nos. 490 140 490 168 1,288 Yr 2 Nos. 508 145 508 174 1,335 Yr 3 Nos. 525 150 525 180 1,380 Total Nos 1,523 435 1,523 522 4,003

3.9

SWOT Analysis Summary

DIIT strengths (S), Weaknesses (W), Opportunities (O), and Threats (T), (SWOT), are summarized as follows: S = Strengths: W = Weaknesses: 1. 2. 1 2. Qualified ICT Instructors Competent Management Limited classroom Inadequate working capital Fast market growth Prospects of Opening a private I. T University High interest rate increases cost of operations High inflation rate erodes purchasing power of the Naira

O = Opportunities: 1 2 T = Threats: 1. 2.

In summary, DIIT will capitalize on its Strengths and Opportunities to neutralize its weaknesses and threats. CHAPTER IV 4.0 4.1 FINANCIAL ANALYSIS AND FORECAST Loan Facility Needs Analysis:
15

S/ N 1 2 3 4.2 1. 2. 3.

Description Fixed Assets Working Capital Total Amount Financing Plan Equity Debt (Applied Loan) Total Company Value

Capital Investment N000 65,000 30,000 N95,000

Additional Capital Needed N000 1,500 500 N2,000

Total N000 67,500 30,500 N97,000

4.2.1 Proposed Financial Structure is: N 95 Million N 2 Million N 97 Million

4.2.2 Purposes of the Loan are to: 1. Procure additional modern ICT equipment 2. Supplement our working capital 4.2.3 Outstanding Liability: None 4.2.4 Loan Tenure Maximum of two (2) years maturity 4.2.5 Loan Repayment Plan The Principal and interest will be repaid monthly for twenty-four (24) consecutive months period. 4.2.6 Collateral Security DIIT land and uncompleted school building or as may be require by Bank. 4.2.7 Loan Guarantor: Mr. Lucky O. Uduikhue, MD/CEO, Data Point Micro-System Ltd.

4.3

Sales Revenue Forecast:

4.3.1 Analysis of Revenue Sources: DIIT operates three I.T. Training sessions: Morning, Evening and Night respectively. The students apply for and are admitted into the 3 Months, 4 Months, 6

16

Months, and one year Certification Programme. The school fees for the various Certificate programmes are: 1. 2. 3. 4. N16, 000 per student in the 3 Months Programme N27, 000 per Student in the 4 Months Programme N32, 000 per Student in the 6 Months Programme N50, 000 Per Student in the one year Programme Additionally, DIIT earns revenues from ICT consultancy and Power solutions services, and the Publications of the following: 1. 2. The Contact Business Magazine The Contact Sports News Paper.

4.3.2 Actual Annual Revenues Earned: N30, 800,000 (Thirty Million and Eight Hundred Thousand Naira) only was the total actual annual revenues earned by DIIT. The analysis of the earned revenue sources is tabulated below: S/ N A. 1 2 3 4 5 B 1 2 3 C 1 D REVENUE SOURCES SCHOOL FEES: Three Months Programme: 350 Students x N16,000/student Four Months Programme: 100 Students x N27,000 / student Six Months Programme: 120 Students x N50,000 / Student One Year Programme: 120 Students x N50,000 / Student Sub Total Amount THE CONTACT PUBLICATIONS: Business Magazines: 15,000 copies @ N300 / copy Sports Newspaper: 80,000 copies @ N50 copy Sub Total Amount SERVICES: ICT Consultancy and Power solutions Services Grand Total Annual Revenue Earned AMOUN T N000 5,600 2,700 5,600 6,000 4,500 4,000 8,500 2,400 N30,800 2,400 N30,800 TOTAL N000

19,900

4.3.3 Sales Revenues Forecast: The school fees per student and the unit selling price of each publication are held constant for simplicity of analysis, and to avoid overstating the revenues and profits, in compliance with the conservatism constraints in accounting. The projected sales revenue streams for three years under review are tabulated below:
17

S/ N A. 1 2 3 4 B 1 2 C 1 D

REVENUE SOURCES SCHOOL FEES: Three Months Programme Four Months Programme Six Months Programme One Year Programme PUBLICATION: The Contact Business Magazine The Contact Sports Newspaper SERVICES: ICT Consultancy Services Total Projected Annual Revenues

Yr 1 N000 7,840 3,780 7,840 8,400 6,750 8,000 3,750 N46,36 0

Yr 2 N000 8,112 3,915 8,112 8,700 10,125 10,000 5,625 N54,58 9

Yr 3 N000 8,400 4,050 8,400 9,000 15,188 12,500 8,438 N65,97 6

4.4

DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY PROFIT AND LOSS ACCOUNTS BUDGET FOR THE YEAR ENDING DECEMBER 31, YEAR 3 ACCOUNTS TITLE NOTES 1 2 YR 1 N000 46,360 (7,203) 39,157 (2,207) (9,250) 27,700 (1,050) 26,650 (7,995) N18,655 YR 2 N000 54,589 (8,027) 46,562 (2,428) (9,250) 34,884 (572) 34,312 (10,294) N24,018 YR 3 N000 65,976 (8,711) 57,265 (2,549) (9,250) 45,466 ---o--45,466 (13,640) N31,826

Sales Revenues (Net) Less: Cost of Services Gross Profit Less: Admin & Selling Overhead Exp. Depreciation Expense Operating Profit Interest Expense Profit before Tax Taxation @ 30% Rate Net Profit (Loss)

18

DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY BALANCE SHEET BUDGET AS AT DECEMBER 31, YEAR 3 ASSETS NOTES YR 1 YR 2 N000 N000 Cash balances 36,043 76,119 Debtors (Net) 1,739 1,965 Stocks 5,166 5,633 Fixed Assets (Net) 3 59,250 50,000 Total Current & Fixed Assets N102,198 N133,717 LIABILITIES & EQUITY Liabilities: Taxes Payable Interest Payable Loan Payable Total Liabilities Share Capital Retained Earnings Shareholders Funds Total Liabilities & Capital 4.6 7,995 1,050 2,278 N11,323 500 18,655 71,720 N102,198 10,294 572 2,722 N13,588 500 42,673 76,956 N133,717

4.5

YR 3 N000 130,010 2,474 6,286 40,750 N179,520

13,640 ---o-----o--N13,640 500 74,499 90,881 N179,520

CAPITAL & RESERVES

B C

DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY CASHFLOW STATEMENT BUDGET FOR THE YEAR ENDING DECEMBER 31, YEAR 3 CASH FLOWS FROM: YR 1 YR 2 Operating Activities: N000 N000 Net Income after Taxes 18,655 24,018 Depreciation 9,250 9,250 Working Capital Changes 5,135 6,808 Net Cash Inflow (Out flow) 33,043 40,076 Investing Activities: Purchase of ICT Equipment (3,500) ---0--Net Cash inflow (Out flow) 29,543 40,076 Financing Activities: Loan BOI 5,000 ---0--Net increase (decrease) in cash 34,543 40,076 Cash Opening balances Cash Closing balances Assumptions The underlying assumptions are:
19

YR 3 N000 31,825 9,250 12,815 53,891 ---0--53,891 ---0--53,891 76,119 N130,010

1,500 N36,043

36,043 N76,119

4.7

1. 2. 3. 4. 5. 6. a. b. c. 7. 8. 9. a. b. 10. 11. 12. 13. 14. 15.

16.

Demand for DIIT Products / services is constant and certain 95% of the total sales are on cash basis 5% of the total sales are on credit 75% of the credit sales are debtors 25% of the credit sales represent bad debts The students enrollment capacity is increased by: 40% in year one from the base year 45% in year two from the base year 50% in year three from the base year All debtors payoff their debts within the year The students school fees and the unit selling price of each publication are constant. The annual staff salaries are increased by: 10% in year 2 from year 1 10% in year 3 from year 2 The work force is constant. No labour turnover Stocks are valued at lower of cost and net realizable value. Fixed assets are depreciated on a straight line basis at rates calculated to write off the cost of each asset over its estimated useful life. The annual profits are retained in the business without reinvestment. No payment of cash dividend to the shareholders. Taxation is imposed on, DIIT profit, at a Corporate tax rate of 30% annually, as if DIIT is a limited liability Company separate from the parent company, Data-Point Micro System Ltd. The Prime Lending Rate (PLR) is 21% Per Annum.

4.8 Risk Analysis: 4.8.1 Return of Investment (ROI) ROI = Net Income x 100 Capital Investment 1 18,655,000 59,250,000 24,018,000 50,000,000 31,826,000 40,750,000 x x x 100 1 100 1 100 1 = = = = 32% 48% 78% 53%

YR 1 = YR 2 = YR 3 =

Average ROI =

32 + 48 + 78
3

4.8.2 Net Present Value (NPV):

ANNUAL DISCOUNT FACTOR 20 NET PRESENT VALUE

YEAR CASHFLOWS 1 2 3 N27,905,000 N33,268,000 N41,076,000

8% 0.926 0.857 0.794

15% 0.870 0.756 0.658 8% N

8% N 25,840,030 28,510,676 32,614,344 15% N

15% N 24,277,350 25,150,608 27,028,008

Present Value of Cash Inflows: YEAR Yr 1 Yr 2 Yr 3 TOTAL PRESENT VALUE Less: Initial Capital Investment Net Present Value (NPV) =

25,840,030 28,510,676 32,614,344 N86,965,050 (68,500,000) N18,465,050

24,277,350 25,150,608 27,028,008 N76,455,966 (68,500,000) N7,955,966

4.8.3 Profitability Summary: SN 1 2 3 Profitability Ratios Gross Profit Margin Net profit Margin Return on Investment YR 1 % 85 40.2 32 YR2 % 85.3 44 48 YR3 % 87 48.2 78 AVERAG E 86 44.13 53

4.8.4 Sensitivity Analysis (SA) Now, we relax the hypothetical assumptions Nos 1 and 14, supra, for sensitivity analysis to determine the effects on the net profits of DIIT when: 1. The sale revenues drop by 20% without change in costs 2. The costs rise by 20% without change in sales. 3. 50% cash dividend of the historical net profit is paid to the shareholders.
DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY HISTORICAL DATA FROM: PROFIT AND LOSS ACCOUNTS BUDGET Accounts Title Yr 1 Yr 2 Yr 3 N000 N000 N000 Sales Revenues (Net) 46,360 54,589 65,976 Costs of services 7,203 8,027 8,711 Admin & Selling Overhead Exp. 2,207 2,428 2,549 Depreciation 9,250 9,250 9,250 Interest Expense 1,050 570 ---o--Net Profit (Loss) N18,655 N24,018 N31,826

1.

No. 1 SCENERIO DIIT

21

20% drop in sales at constant costs: Accounts Title

Sales Less: Costs of services Gross Profit Less: Admin & Selling Expense Depreciation Profit from operations Interest Expenses Profit before Taxes Taxation @ 30% Rate Net Profit (Loss)

Yr 1 N000 37,088 (7,203) 29,885 (2,207) (9,250) 18,428 1,050 17,378 (5,213) N12,165

Yr 2 N000 43,671 (8,027) 35,644 (2,428) (9,250) 23,966 570 23,394 (7,018) N16,376

Yr 3 N000 52,782 (8,711) 44,070 (2,549) (9,250) 32,271 ---o--32,271 (9,681) N22,590

No. 2 SCENERIO DIIT 20% rise in costs at constant sales: Account Title
Sales Less: Costs of services Gross Profit Less: Admin & Selling Expense Depreciation Profit from operations Interest Expenses Profit before Taxes Taxation @ 30% Rate Net Profit (Loss)

2.

Yr 1 N000 46,360 (8,644) 37,716 (2,648) (11,100) 23,968 (1,260) 22,708 (6,812) N15,896

Yr 2 N000 54,589 (9,632) 44,957 (2,914) (11,100) 30,943 (680) 30,257 (9,077) N21,180

Yr 3 N000 65,976 (10,453) 55,523 (3,059) (11,100) 41,364 ---o--41,364 (12,409) N28,955

No. 3 SCENERIO DIIT 50% Cash dividend payment to shareholders: Account Title Yr 1 N000 Net Profit (Historical) 18,655 Less: 50% Cash Dividend (9,328) Net Profit (Loss) N9,328 4.9
1 1 2 3 2

3.

Yr 2 N000 24,018 (12,009) N12,009

Yr 3 N000 31,826 (15,913) N15,913

DATA-POINT INSTITUTE OF INFORMATION TECHNOLOGY NOTES ON THE ACCOUNTS DECEMBER 31, YEAR 3 Cost of Services: Yr 1 Yr 2 N000 N000 Academic Staff Salaries 5,145 5,660 Stocks: Educational and Publication Materials 2,058 2,367 Total Amount N7,203 N8,027
Admin & Selling Overhead Exp: 22 Yr 1 N000 Yr 2 N000

Yr 3 N000 6,226 2,485 N8,711 Yr 3 N000

1 2 3 4 5 6 7 8 9 10 11 12 13 1 4

Rental Expenses Non-Academic Staff Salaries Electricity Bill NEPA Petrol, Oil and Diesel Telephone & Communications Printing & Stationery Supplies Advert & Public Relations Repairs and Maintenance (RAM) Professional & Consultancy Fees Bad debts Expenses Transport and Logistics Insurance Expenses Misc. Admin & Selling overhead Exp. Total Amount

450 340 85 106 72 94 110 86 75 580 65 60 84 N2,207

450 374 74 110 76 98 150 120 75 682 72 60 87 N2,428

450 411 62 116 68 56 115 125 75 825 84 60 102 N2,549

3.
Fixed Assets:

Fixed Assets Schedule:

LAND N000 2,500 ---0--2,500 ---0-----0-----0--N2,500 BLDG N000 10,000 ---0--10,000 ---0--500 500 N9,500 P&M N000 15,000 ---0--15,000 ---0--3,000 3,000 N12,000 C &OE N000 23,0000 F&F N000 13,000 ---0--13,000 ---0--1,300 1,300 N11,700 MV N000 5,000 ---0--5,000 ---0--1,000 1,000 N4,000 TOTAL N000 68,500 ---0--68,500 ---0--9,250 9,250 N59,250

Cost as at 1/1/Yr 1 Additions during the year Cost on 31/12/Yr 1 23,0000 Depreciation on 1/1/ Yr 1 Current Charge 3,450 Depreciation on 31/12/Yr 1 3,450 Net Book Value (NBV)on N19,55 31/12/Yr 1 0 N/B: **BLDG = Building, ***P&M = Plant and Machinery, ***C &OE = Computers and Office Equipment, ***F&F = Furniture and Fittings *** MV = Motor Vehicles 4. Loan Amortization Schedule Principal at start of period Add: Interest for the Period. Balance: Less: Payment Principal start of next period. Total Principal + Interest Payments = Total Number of Periods Monthly Payments = = Yr 1 N 5,000,000 1,050,000 6,050,000 (3,327,500) 2,722,500 N6, 621,725 24 Months (2 Years) N6, 621,725 24 = Yr 2 N 2,722,500 571,725 3,294,225 (3,294,225) ---o---

MONTHLY PAYMENT CALCULATION

N275, 905 / Month

CHAPTER V 5.0 CONCLUSIONS AND RECOMMENDATION

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5.1

Summary of Findings and Conclusions The investment in DIIT vividly shows:

1. 2.

Net profits of N18,655 Million in year one, N24,018 Million in year two, and N34,826 Million in year three respectively. Positive Net Present Value (NPV) of N18, 465 Million at 8% discount, and N7, 956 Million at 15% discount respectively. Moreover, the Return on Investment (ROI) of 32% in year one, 48% in year

two, 78% in year three and an annual average of 53% further buttress the overall profitability of DIIT project investment. Continuing, the sensitivity analysis tests conducted strongly amplified and justified the profitability of the DIIT investment because the results under three different Scenarios still shows high net profits when: 1. 2. 3. The sales drop by 20% at constant costs The costs rise by 20% at constant sales. 50% of the historical net profit is paid as cash dividend to the shareholders of the institution. In view of the foregoing results, therefore, we hereby conclude that the DIIT investment is lucrative, profitable, and that otherwise the future of DIIT is undoubtedly prosperous. 5.2 Recommendation

The applied loan facility of N2 Million should be granted to enable the institution, DIIT, to procure additional modern ICT equipment and to supplement its working capital. Signed LUCKY UDUIKHUE, (B.Sc, CEH, ECSA, LPT, MNIM, MNCS). Managing Director/CEO (Certified Ethical Hacking & Information Security Analyst). For: Data-point Microsystems Limited. lucky@datapointonline.com.ng +234-01-7614402, 08039262657, June 27th, 2011 The Branch Manager,
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Diamond Bank Plc, Ibafor Apapa, Lagos State, Nigeria. Sir, APPLICATION FOR TWO MILLION (N2, 000,000) TERM LOAN FACILITY: We humbly apply for a term loan facility of N2, 000,000 (Two Million Naira only) for a subsidiary Data-Point Institute of Information Technology, (DIIT), through your reputable Bank. The loan is required to procure additional modern ICT laboratory equipment, Branch Network Expansion and to supplement our working capital. The principal and interest will be paid monthly for twenty-four (24) consecutive month period, and the loan will be liquidated at the end of the two years maturity. Personal guarantee of the Managing Director/CEO, Mr. Lucky O. Uduikhue, of the parent company, Data-Point Microsystems Ltd. Please find enclosed herewith a copy of our detailed Business plan for the loan applicant, DIIT and 10th School convocation magazine for your perusal. We are looking forward to having mutual and profitable business relationship with your reputable bank. Thank you for your anticipated favourable response. Yours Faithfully,

Mr. Lucky O. Uduikhue Managing Director/CEO For: Data-Point Microsystems Ltd. lucky@datapointonline.com.ng

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