5.1 Annual Income
In order to calculate the income, we will have 2 main sources: the first one will be the income generated from renting our cabins and the second one will be the one generated from additional tourist services. The project is expected to begin in January 2019 and expected to finish in the end of December 2019. Therefore, we will start generating income since January 2020. As it can be referred on Table 1, we will have 4 cabins, the first cabin will be directed towards families and will have a cost of $75.00 during the high season and $55.00 during low season. Cabin B and C will be designed for couples and the charges will be $55.00 during high season and $40.00 during low season. The last cabin design will be designed for individual travelers and it will contain 3 bunk beds and will be charge daily per person during the high season $10.00 and during low season $8.00.
Table 4: Year 2020 Expected Generated Revenue from Cabins
Cabin
As it can be referred above, in the year 2020, we anticipate to generate $57,630.00 from renting our Eco friendly cabins. In our first year of operation, we are assuming an 80%
Occupancy rate during the high season and a 60% occupancy rate during low season.
However we are every year increasing by 2% the occupancy rate until we reach the 5th year and then we maintain constant Occupancy rates. This occupancy rate has been calculated based on the amount of yearly tourist income we have in Panama, while taking in account the European and North American travelers with age from 25 to 40, while taking in account the lack of competition. If we project the total revenue of operation within our first 10 years, we will obtain a revenue from renting our Cabins of $648,938.243.
Our second source of generating revenue will be offering special touristic packages, as it can be referred in Table 5. We have developed special packages such as visit to the Panama Canal Gatun locks and observation center among other activities.
Table 5: Year 2020 Expected Generated Revenue from Tourist Services
Tourist Services Price Expected Tourists Total Income
Gatun Locks Visitor Center $25 700 $17,500.00
activity mainly based on yearly attendance to our lodge. Each year for the following 5 years, we have increased by 5% the amount of tourist we begun with in 2020. Other than that we have estimated that the cost for doing does activities will be approximately 60% of the price we charge our guests, therefore 40% will be revenue for our Eco lodge. Estimated the source of revenue from Tourist Services in the first 10 years of operations will be of $389,362.949.
5.2 Eco- Cabin Fixed Capital
Our main fix capital expenses will consist of the 1 Hectare property, cost of 4 full equipped cabins, as well as development of the project among others details. Totaling an initial investment of $220,000.00. In order to depreciate this total amount of capital investment, we will proceed to use straight line depreciation method within the length of the project which is 10 years. According, it will add a burden of $22,000 on expenses on every year for the duration of the project.
5.3 Operating Expenses
The main operations expense will be the Salaries, to which we will allocate $1,200.00 per month. This salary will be for a full time worker taking care of the Eco Cabin and a part time worker that will do cleaning services and gardening. Additionally we will also allocate yearly stipends for marketing, miscellaneous expenses and contingencies. We forecast that we will have an annual operating expenses of $20,400.00 for all related activities with the Hospitality services. In addition to hospitality services we will also offer touristic services to our guests.
Daily activities like visiting the Gatun canal locks or even hiking trip, we forecast that the expenses of this events will be 60% of the charge we will make to our guests.
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5.4 Gross Profit
In order to calculate Panama Eco Cabin, we were able to forecast the revenues and expenses for the following 10 years of operations. Anticipating inflation, we factor in an extra 5% every year in order to account for inflation. We also forecast that during the first 5 years we will acquire 2% increase in accommodation rates. As it can be observed in Table 5 below.
As we begin operations, since we had an initial fixed capital of $220,000.00 and we proceed to depreciate in 10 years. Accordingly the first year of operations, since we are starting to build the Eco-lodge, then we will lose $22,000.00. Once we begin our first year of operations in 2020 we will begin to acquire revenues generated from hospitality and tourism services. As forecast, by the year 2023 our company will have break even and since that point we will start having positive numbers. By the year 2029 we are expected to accumulate $352,819.00.
5.5 Net Present Value of the Project
In order to calculate the NPV of Eco Cabin resort, we have determined a discount rate of 10%, and a 10 year long project life. The discount rate has been analyzed taking in account the interest rate in Panama, and also taking a conservative approach by increasing it to 10%. We
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have forecast the initial total investment, as well as the cash flow for the first 10 years of operations. The expected value of all expected cash flows is of $352,819.00 since the initial investment is of 220,000 Therefore the NPV of our project is of +$195,656.55 which indicates that if we execute the project successfully, we will have great success.