Samvar Ltd, a leading FMCG company having its current presence in more than 150 Tier I and Tier II cities in India. The stores are operating in the…

Samvar Ltd, a leading FMCG company having its current presence in more than 150 Tier I and Tier II cities in India. The stores are operating in the brand name of GoMART competing with Reliance fresh, Walmart, BigBazaar and other chains. Owing to the increase in demand from Tier III cities and rural areas, it is planning for massive expansion and is contemplating to open up additional 50 stores which will have variety of FMCG products. The CFO and his team estimate that the funds needed for massive expansion would be 200 lakhs per store. Such funds would be utilized for buying out a space and setting up a store, buying the other required fixed assets, etc. Central government will provide a revenue subsidy of 15% on Gross profit if the overall cost of capital doesn't exceed 10% Apart from above, CFO and his team require an estimate on the additional capital needed based for the smooth running of fixed assets and its daily operations. Based on their market research, they have collected the other information for each store which is as follows- Average Sales would be 120 lakhs p.a. with a GP margin of 18%. Customers pay through different digital modes and channels including POS systems (Debit and credit cards) which generally takes approx. 9 days for the funds to get credited in the bank account. 15% of the customers use debit and credit cards to make the payment. Installing a POS system comes with a fee of 2% of total sales through POS. Being a FMCG outlet, inventories of multiple products need to be kept. Different products have different storage period. However primarily, products are classified into three broad categories, Durable, Semi Durable & Perishable. Perishable products comprise 60% of sales, whereas semi-durable is 25% and balance is for durable products. Inventory storage period for perishable, semi-durable & durable products are 10 days, 30 days & 60 days respectively. Suppliers of these products provide a credit period of average 30 days. Each store will employ around 20 personnel of a different hierarchy and monthly average salaries to staff for each store is estimated at 4 lakhs per month. Company will pay employees' dues on the 1st of next month. Samvar Ltd plans to keep optimum cash balance in hand as suggested by Baumol's model. Excess cash balance if any, will be invested in the marketable securities which will generate a return of 12% p.a. The total disbursement for the year is estimated at 1.50 lakhs per month with the transaction cost of 20 per transfer to the disbursement account. The optimum capital structure with debt equity of 2:1 has been proven ideal for raising the finance and company wishes to follow the same pattern for the additional funds required for each store. Trade credit can also be utilized for financing the expansion needs. The cost of raising debt and equity for each store is as per the slabs as under: Project Cost * Cost of Debt Minimum rate expected by equity share holders Upto 80 lakhs 10% 12.5% Above 80 lakhs but upto 150 Lakhs 11.5% 13.5% Above 150 lakhs & Upto 250 lakhs 12% 14% Above 250 lakhs 13.5% 15% *It means that upto 80 lakhs of project cost company can raise debt at 10% and equity at 12.5% and so on. Tax rate applicable to the corporate is 25% Based on the above details, calculate the following for each store: