FEASIBILITY STUDY On DMC Sparkle WATER REFILLING STATION

INTRODUCTION The demand at the water refilling stations water stores that sell purified water is now increasing. The quality of purified water conforms to the national standards for drinking water and is even better than the quality of water produced by traditional water supply systems in terms of removed impurities. Over the years, as the demand for cleaner water becomes higher, the price of household water purifiers and bottled water has become prohibitive. Water refilling stations managed by private entrepreneurs offer a cheaper and more convenient solution to the publics drinking water needs than bottled water or the use of household filters. At present, about 15 water refilling stations have proliferated in Dipolog City. They sell purified water of comparable quality with bottled water at a lower price. For example, the current price per gallon of refilled purified water in Dipolog City ranges from P 20 to P 3 per 5-gallon container when bought on store site, while prices ranges between 25 to 35 when delivered within Dipolog City.. In Dipolog City, most of the water refilling stations is connected to the pipes of Dipolog City Water District for their source of raw water while in other areas they opt to use private deep wells. The potable water supplied by the providers is then further purified by utilizing a combination of water treatment equipment, such as sediment filters, carbon filters, water softeners, reverse osmosis membranes, ultra-violet lamps, and ozone generators. Typical water refilling stations can produce 3,000 to 12,000 liters of purified water per day. In previous years, most of the people were bringing containers to a water refilling station to buy purified water. Nowadays, because of convenience on the part of the consumers, purified water in 5gallon (22.7 liters) containers is delivered by the station directly to the peoples home.

Proponent: DMC- COLLEGE FOUNDATION SCHOOL OF BUSINESS STUDENTS Proposed Location: DMC College Foundation Campus Fr. Patangan Road, Mibang, Dipolog City

Objectives: A. Provide a potable drinking water for the community. B. Service the drinking water needs of DMCCF students, and Concha Croup of Companies employees and their families C. Empower students taking up Business and Accountancy to develop their entrepreneurial skills and expose them to an actual business venture. Nature of the Business The School of Business and Accountancy focuses on real industry based learning, thus, the department always explore ways to develop the knowledge and skills of its students when it comes to business incubation, launching and operation. Empowering its students through actual exposure to existing business operation will develop their entrepreneurial spirit and gain confidence to venture into business, that will propel them to financial success in the future. The water refilling station; DMC Sparkle will provide DMCCF staff and students, clear, sparkling, clean drinking water at very affordable prices. The DMC Sparkle Water will be available is various refillable sizes of containers to cater to the needs of different demographics and market. . DMC Sparkle will also offer additional services like free delivery and the product can also be availed on credit for DMC-College Foundation faculty and staff and all employees of the Concha Group of Companies, wherein payment arrangement will facilitated through salary deduction from their paychecks among their respective offices.

MARKETING ASPECT
Target Market Students, Faculty and Staff of DMC-College Foundation, Dipolog Medical Center, Mennens Gift Mart Corporation, Zanorte Industries, Concha Construction, Zanorte General Services and Rizal Rural Bank. Local Residents of Dipolog City

Demand

The Concha Group of Companies, including the DMC-College Foundation has a total employees of more than 500, and students living within the vicinity of the DMC Campus is about 300, while during classes most students prefer drinking from purified water and on any given day, DMC has more than 1,200 students in its campus. The area within the DMC campus, where DMC Sparkle Water Refilling Station will be located, has a population of more than 1,500 households on the two barangays namely Sta. Isabel and Sta. Filomena. And with only one existing refilling station situated in the area. On the average, a family of four members consumes three (3) 5-gallon purified water every week or 12 containers a month. Students were surveyed and revealed that they consume one (1) 5 gallon container a week Using this data the projected demand for water refilling station in the specified area is: Estimated Weekly Consumption (in 5 gallon containers) Estimated Monthly Consumption (in 5 gallon containers)

Target Market

Population

DMC Concha Group of Companies Local Households Students TOTAL Demand in Gallons
Table 1 Demand Chart

500

1500

6,000

1500 300 2,300

4500 300 6,300 31,500

18,000 1200 25,200 126,000

Market Share

It is assumed that since the targeted market is members of the Concha Group of Companies and DMC Hospital; and DMC-College Foundaiton, 50% of the member will opt to buy from DMC Sparkle (and since this can be acquired through credit, and subject to salary deduction). Since DMC Sparkle is located within DMC, students can readily access the products and a assumption of 80% is valid. While considering the accessibility factor, 10% of the local residents are also going to consider getting their purified water supply from the store.

Target Market

Estimated Weekly Consumption (in 5 gallon containers)

Market Share

Estimated Monthly Consumption (in 5 gallon containers)

Market Share

DMC Concha Group of Companies Local Households Students TOTAL in Gallons

Table 2 Market Share

1500

750

6,000

3000

4500 300 6,300 31,500

450 240 1440 7,200

18,000 1200 25,200 126,000

1800 960 5,760 28,800

Proposed Marketing Strategy Product Strategy Refilling Station will be constructed with transparent glass and
according to prescribed standards so that the customers will be able to see how carefully and cleanly the products are being processed. Excellent quality will be maintained by giving the workers training and guidance on good manufacturing practices.

Distribution Strategy A delivery vehicle will be purchased to shorten waiting time

of customers. Customers can order thru phone call or text and 20 minutes waiting time will be observed. It will also be assured that products will be handled properly and will maintain its quality during delivery.

Promotion Strategy Information dissemination will be done so that target market will be aware of the existence of the water refilling station. Target markets will be informed of the benefits and importance of drinking clean water and the added benefits of buying it DMC Sparkle, that offers salary deduction

options for employees of the Concha Group, including DMCCF and DMC Hospital. Pricing Strategy Being a new entrant, Aqua Kabayan will offer an affordable
price of 25.00 per container, free of delivery charge

SALES PROJECTIONS
YEAR 1 YEAR 2 YEAR 3

in units of 5 gal containers Selling Price Total Sales

Table 3 Three Year Sales Projection

69,120 25 1,728,000.00

76,032 25 1,900,800.00

83,635 25 2,090,875.00

MARKETING BUDGET Delivery Vehicle There is a need to purchase a delivery vehicle to ensure the fast and timely delivery of products. Consumers prefer to buy products that are readily available and with minimal waiting time. Water is a basic need and there should be no delays in the delivery. Estimated cost of a delivery vehicle is at Php 75,000.00. Estimated Useful Life is five (5) years. Fuel Consumption in the delivery of goods is estimated at 500.00 per day. Information Dissemination The awareness campaign will entail costs of printing flyers (for distribution) and tarpaulins (to be placed at strategic locations). Cost of these materials is estimated at Php 10,000.00.

Packaging and Labeling

Initially, 100 units of containers (5 gal) will be purchased. Since most of the consumers already have containers, the said containers will be replaced every delivery. Empty containers will be refilled and delivered to other customers so that consumers will only have to pay for the contents and not the containers. All containers should have labels, bearing the name of Aqua Kabayan and all containers should all be sealed to ensure that the product reaches the end consumer with utmost quality. Fifteen thousand pieces of labels and seals will be printed on a quarterly basis. Estimated cost is Php 3.00 per container. Manpower There will be 2 persons handling the delivery, both of which should know how to drive the delivery vehicle so that they can work alternately on the tasks to be assigned to them. They are going to receive salaries of Php 4,500 a month or Php 150.00 daily.

Account Title Delivery Vehicle Fuel and Lubricants Promotions Packaging (containers) Materials and Supplies (stickers) and seals (quarterly) Salaries and Wages TOTAL
Table 4 Marketing Budget

Amount in Pesos 75,000.00 15,000.00 10,000.00 15,000.00 45,000.00 9,000.00 169,000.00

MARKETING EXPENSES Account Title

Delivery Vehicle Depreciation) Fuel & Lubricants Promotions Packaging (containers) Materials and Supplies (stickers) and seals (quarterly) Salaries and Wages TOTAL
Table 5 Marketing Expenses (three years)

YEAR 1

YEAR 2

YEAR 3

( Amount of 15,000.00 180,000.00 10,000.00 5,000.00 15,000.00 198,000.00 10,000.00 5,000.00 15,000.00 217,800.00 10,000.00 5,000.00

180,000.00 108,000.00 498,000.00

198,000.00 118,800.00 544,800.00

217,800.00 130,680.00 596,280.00

PRODUCTION ASPECT
Production Process (water filtration & purification system)

1st unit Stage 1 Stage 2 Stage 3 Stage 4 2nd unit Stage 5 Stage 6 Stage 7 3rd unit Stage 8 Stage 9 Stage 10 Stage 11 4th unit Stage 12

Multimedia sediment process

The water first passes through the 1st stage which makes up of a course gravel that traps solid particles of about 100 micron Consists of sand filters that removes sediment of 50 micron ratings Consists of fine sand that eliminates solid particles of 25 micron Consists of fine clear slit that eliminates solid particles down to 5 micron Multi media carbon process Makes use of a lignite carbon that removes foul taste and odor Makes use of bituminous carbon that eliminates yellowish and brownish discoloration brought by inorganic contaminants Makes use of granular activated carbon (GAC) as the last multi media carbon stage. This stage is where the water undergoes longer contact time with the carbon to eliminate other contaminants that might cause foul smell or taste Water conditioning and softening process Makes use of resin beads that attract mineral contents that convert hard water to soft water Makes use of ion exchange beads to condition water by extracting the organic and inorganic chemicals present in the water Makes use of another carbon that eliminates any ferrous iron (dissolved iron) in water Makes use of fine gravel that serves as a sieve which eliminates any residue that might come out during regeneration time. This is a cleansing agent. Ultra micron process Consists of a one (1) big blue housing that includes 1 micron cartridge that

5th unit Stage 13 6th unit Stage 14 7th unit Stage 15 8th unit Stage 16

eliminates any microscopic residue that might go to the reverse osmosis membrane. This stage stands as a protection for the membrane against premature clogging Reverse osmosis It is the most important system in any water filtration and purification process. This makes use of reverse osmosis equipment which has semi-permeable membrane that only allows pure water to pass through and pushes the unpure water out of the system to the reverse side or the reject drain line. Polishing process Includes one (1) big blue housing that consists of a carbon cartridge that serves as a polishing stage to make the water crystal clear and shiny Anti-microbial process This stage eliminates cyst micro organism that has a micron rating of 1 and has a very thick cell wall where UV light sometimes cannot penetrate; however a micron rating of 0.5 will eliminate such kind of micro organisms. Cyst causes diarrhea and gastro enteritis. Water sterilization process This last and final stage is the second most important system in a water filtration and purification system. This is the stage that kills all microorganisms and other diseases causing bacteria from infiltrating into the product water, thereby assuring safe and pure water.

Table 5 Production Process

Fixed Assets Required:

Item Land Machineries & Equipment Building (25 sq meters) TOTAL

Amount 50,000.00 300,000.00 150,000.00 500,000.00

Useful Life in Years

Annual Depreciation

15 20

20,000.00 7,500.00 27,500.00

***Repairs and maintenance of equipment is assumed at 2.00 per month. Table 6 Schedule of fixed Assets Required

FACTORY LOCATION AND LAY OUT

COST OF LABOR There will be 2 workers tasked in refilling and cleaning of containers. The cooperative manager will be the one to oversee the production and help in the operation whenever it is needed. The two workers will be receiving Php 4,500 a month. MATERIALS AND SUPPLIES Materials and Supplies are estimated at Php 6,000.00 monthly (water is the major raw materials needed). FACTORY OVERHEAD Overhead expenses are composed of Utilities, Telephone Bills and Depreciation. Electric consumption is assumed at Php 7,500.00 monthly and telephone bills are at Php 1,000.00 per month. Please refer to Depreciation table for depreciation expenses.

PRODUCTION COST
Account Title Direct Labor Materials & Supplies Depreciation (Building) Depreciation (Machineries & Equipment Utilities TOTAL
Table 7 Production Cost (three years)

YEAR 1 108,000.00 72,000.00 7,500.00

YEAR 2 118,800.00 79,200.00 7,500.00

YEAR 3 130,680.00 87,120.00 7,500.00

20,000.00 102,000.00 309,500.00

20,000.00 112,200.00 337,700.00

20,000.00 123,420.00 368,720.00

PRODUCTION COST PER UNIT

YEAR 1 TOTAL PRODUCTION COST MARKETING EXPENSES Units Produced PC PER UNIT
Table 8 Production Cost per unit (three years)

YEAR 2 337,700.00 544,800.00 76,032 11.60

YEAR 3 368,720.00 596,280.00 83,635 11.58

309,500.00 498,000.00 69,120 11.68

ORGANIZATION AND MANAGEMENT ASPECT

1. Form of Business Corporation 2. Business name DMC Sparkle Water Refilling Station 3. Organizational Chart

Board of Directors

General Manager

Accounting Students

Worker 1

Worker 2

Worker 3

Worker 4

4.

Key Personnel and Responsibilities General Manager In charge of the overall operation of the business. Acts as the
marketing officer and represents the business in all external concerns. The manager will oversee the entire operation of the business and collects cash sales for remittance to the cooperative treasurer.

Accounting Students will monitor daily sales and operation cost and will handle
weekly audits.

Worker 1 & Worker 2 will handle the plant operation. They will be in charge of
cleaning and refilling containers. They will also observe proper sanitation of the plant and maintain excellent quality of the product.

Worker 3 and Worker 4

will be tasked in the delivery and distribution of the products. They will ensure that all deliveries are done at the shortest possible time. They will also handle collection of payments and issuance of receipts during delivery.

FINANCIAL ASPECT
TOTAL CAPITAL REQUIREMENTS

Account Title Fixed Assets: Land Machineries & Equipment Building (25 sq meters) Delivery Vehicle Total Fixed Assets Required Workling Capital: Salaries & Wages Returnable Containers Materials & Supplies Fuel, Gas & Lubricants Promotions Raw Material Supply (Water) Utilities Total Working Capital (first 3 months of operation) TOTAL CAPITAL REQUIREMENTS
Table 9 Total Capital Requirements

Amount

50,000.00 300,000.00 150,000.00 75,000.00 575,000.00

54,000.00 15,000.00 45,000.00 45,000.00 10,000.00 18,000.00 25,500.00 212,500.00 787,500.00

INCOME STATEMENT
Year 1 Sales Less: Cost of Sales Direct Labor Materials & Supplies Factory Overhead Expenses Depreciation Expense (Building) Depreciation Expense (M & E) Utilities Total FOE Cost of Goods Available for Sale Gross Profit on Sales Less: Operating Expenses Marketing Expenses Fuel, Gas & Lubricants Promotions Packaging (containers) Materials & supplies 180,000.00 10,000.00 5,000.00 180,000.00 198,000.00 10,000.00 5,000.00 198,000.00 118,800.00 15,000.00 544,800.00 1,018,300.00 217,800.00 10,000.00 5,000.00 217,800.00 130,680.00 15,000.00 596,280.00 1,125,875.00 108,000.00 72,000.00 118,800.00 79,200.00 130,680.00 87,120.00 1,728,000.00 Year 2 1,900,800.00 Year 3 2,090,875.00

7,500.00 20,000.00 102,000.00 129,500.00 309,500.00 1,418,500.00

7,500.00 20,000.00 112,200.00 139,700.00 337,700.00 1,563,100.00

7,500.00 20,000.00 123,420.00 150,920.00 368,720.00 1,722,155.00

Salaries & Wages 108,000.00 Depreciation Expense Delivery Vehicle 15,000.00 Total Marketing Expenses Net Operating Profit
Table 10 Income Statement

498,000.00 920,500.00

CASH FLOW STATEMENT

Cash Inflows Initial Capital Sales Total Cash Inflows Cash Outflows Purchase Land Purchase & Installation of Machineries & Equipment Construction of Building Purchase of Delivery Vehicle Purchase Returnable Containers Purchase of Labels & Stickers Fuel, Gas & Lubricants Payment of Salaries & Wages Promotions Expense Payment of Raw Material Supply Payment of Utilities Total Cash Outflows Net Cash Inflows Add: Cash Balance Beg. Cash Balance, end
Table 11 Cash Flow Statement

Year 1 787,500.0 0 1,728,000.00 2,515,500.0 0 50,000.0 0 300,000.0 0 150,000.0 0 75,000.0 0 15,000.0 0 180,000.0 0 180,000.0 0 216,000.0 0 10,000.0 0 72,000.0 0 102,000.0 0 1,350,000.0 0 1,165,500.0 0 1,165,500.0 0

Year 2

Year 3

1,900,800.00 1,900,800.00

2,090,875.00 2,090,875.00

198,000.0 0 198,000.0 0 237,600.0 0 10,000.0 0 79,200.0 0 112,200.0 0 835,000.0 0 1,065,800.0 0 1,165,500.0 0 2,231,300.0 0

217,800.0 0 217,800.0 0 261,360.0 0 10,000.0 0 87,120.0 0 123,420.0 0 917,500.0 0 1,173,375.0 0 2,231,300.0 0 3,404,675.0 0

BALANCE SHEET
Year 1 Assets Cash Land Building Machineries & Equipment Delivery Vehicle Returnable Containers Total Assets Liabilities & Capital DMC Sparkle Investments Add: Net Income from Operation Total Liabilities & Capital
Table 12 Balance Sheet

Year 2

Year 3

1,165,500.00 50,000.00 142,500.00 280,000.00 60,000.00 10,000.00 1,708,000.00

2,231,300.00 50,000.00 135,000.00 260,000.00 45,000.00 5,000.00 2,726,300.00

3,404,675.00 50,000.00 127,500.00 240,000.00 30,000.00 3,852,175.00

787,500.00 920,500.00 1,708,000.00

1,708,000.00 1,018,300.00 2,726,300.00

2,726,300.00 1,125,875.00 3,852,175.00

FINANCIAL RATIO NALYSIS

PROFITABILITY RATIOS Return on Assets (ROA) Net Income Total Assets Return on Equity (ROE) Net Income Owner's Equity Net Profit Margin Net Income Sales
Table 13 Financial Ratio Analysis

1)

920,500.0 0 1,708,000.0 0 920,500.0 0 1,774,000.0 0 920,500.0 0 1,728,000.0 0

0.5 4

2)

0.5 4

3)

0.5 3

Prepared by:

RAUL T. NOCETE COORDINATOR SCHOOL OF BUSINESS AND ACCOUNTACY DMC COLLEGE FOUNDATION