NATIONAL ECONOMICS UNIVERSITY

INTERNATIONAL SCHOOL
of MANAGEMENT and ECONOMICS


GROUP ASSIGNMENT FOR CORPORATE FINANCE

Group 1
MEMBERS: Đinh Quốc Anh
Khổng Diệu Hà
Vũ Phương Linh
Lê Thu Phương
Nguyễn Huyền Vi
CLASS: BBAE-i4A

Hanoi, 11th of November, 2023

MỤC LỤC
INTRODUCTION 1

1. MARKET ANALYSIS 2
1.1. Industry overview 2
1.2. Consumer trends for speciality coffee 2
1.3. Market analysis 2

2. RELATED CASH FLOWS

2.1. Unrelated cash flows 3
2.2. Related cash flows 3
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3. OPERATING COSTS
3.1. Depreciation 7
3.2. Operating cash flows 7
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4. TOTAL CASH FLOWS
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5. PROJECT EVALUATING

6. APPENDIX
 INTRODUCTION
Our coffee shop “Quirky Bean Bar” is situated in a spacious area, approximately
100m2, at Tạ Quang Bửu Street. With a prime location right in the midst of an area
with numerous schools, universities, and offices, our coffee shop offers a comfortable
and cozy space for both students and coffee enthusiasts.
Operating from 6 a.m. to 11 p.m., our goal is to cater to the diverse needs of customers
from early morning until late at night. This is not just a place to enjoy delicious coffee
but also an ideal destination for group study sessions, meeting friends, or even
freelancing.

We chose to open our coffee shop in this area not only for its convenient location but
also fueled by a burning passion for coffee. We aspire to create a friendly, innovative
space filled with positive energy. Our coffee shop is more than just a place to savor
good coffee; it's a space to share ideas, meet new friends, and relish moments of
relaxation in the midst of a bustling town.

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 I. MARKET ANALYSIS
I.1. Industry overview
Despite many fluctuations in the economy from the end of 2022 to the beginning of
2023, the general market is forecast to face many difficulties. However, according to
our reports, the market value of Vietnam's F&B industry in 2023 will be expected to
increase by 18% compared to 2022, reaching a revenue milestone of about VND 720.3
trillion.
After two years of overcoming due to the Covid-19 pandemic, the F&B market in
2022 has regained growth, even surpassing pre-Covid-19 levels. Specifically, in 2022,
Vietnam recorded about 338.6 thousand restaurants with an annual growth rate of
about 2% from 2016 to 2022. The revenue of the F&B industry also rose by an
impressive growth rate of 39% compared to 2021, reaching nearly VND 610 trillion,
surpassing the time before the epidemic in 2019.
With a strong recovery and growth, the F&B industry is predicted to continue to grow
at a steady pace and is expected to reach a value of nearly VND 940 trillion (USD 39
million) by 2026.
In conclusion, F&B is one of the growing industries and has the opportunity to break
through in Vietnam. In particular, the milk tea and coffee market is one of the hottest
markets today in our country. It is not difficult to see a series of milk tea and coffee
shops from small to large brands on the same street. The increasing demand for food,
entertainment, and meetings of young people leads to the search for new places, cafe
shops are one of the top choices.

I.2. Consumer trends for speciality coffee

According to iPos' 2022 Vietnamese culinary business report, many Vietnamese
people are willing to spend more than 40,000 for each coffee trip. Of these, up to 44%
are willing to spend 41,000 - 70,000. This is the spending level for mid-range brands
such as Highland Coffee, Phuc Long, The Coffee House,... Others account for 14%
when spending from 71,000 on high-end brands such as Starbucks, Runam Bistro,...
People with an income from eleven million are willing to spend over 70,000 to drink
coffee. This rate accounts for twenty percent.
Young people's spending on coffee and milk tea is higher than the amount spent on 3
main meals of the day. According to the survey, Vietnamese people often spend
10,000 - 30,000 VND for breakfast, 30 - 50,000 VND for lunch and dinner. Meals are
usually rice and pho at popular restaurants and sidewalks. Meanwhile, coffee is at
expensive shops or famous brands.

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According to Euromonitor statistics, the size of the Vietnamese coffee market will
reach more than 10,845 billion VND by 2022. With a growth rate of 7.9%, the market
is expected to reach 11,779 billion VND this year. 15,837 billion VND in 2027.
Based on those statistics above, we came to a decision of setting our products prices at
the average price as 40.000 VND.
I.3. Market analysis
a. Location
First of all, our new coffee shop will be established on Ta Quang Buu street. It is easy
to see that the location is near 3 universities, which are National Economics
University, Hanoi University of science and technology and Hanoi University of Civil
Engineering. These 3 universities are considered to have nearly 91000 students
studying and 4000 staff. Being close to universities provides a steady flow of student
customers, faculty, and staff. Students often seek study spaces, a relaxed ambiance,
and quality coffee. The fact that our coffee shop will be near 3 universities leads to a
consistent labor resource, which are those students seeking for part-time jobs. This
prevents our business from suffering from the lack of employees in peak time of the
business year . Besides, there are a large number of companies around that area. The
nearby companies can be a valuable source of regular customers, including office
workers and professionals seeking a convenient place for meetings or a coffee break.
The location is in the central district of Hanoi, this helps enable the efficiency in
logistics of delivering raw materials for our products and other smallware like napkins,
paper cups, etc. . The advantage of the location also brings large traffic from online
customers, who place their orders on Grabfood, Baemin and others.

b. Target customers
Based on those advantages from the location, our target customers will be students and
staff from these three universities, companies staying near the coffee shop and the
locals.
In our market analysis, we have identified a key demographic for our coffee shop
business. Our primary target customers are young adults, predominantly in the age
range of 18 to 30 years. This group includes university students from the nearby
educational institutions and young professionals. Our research indicates that this
demographic is ready to spend between 35,000 to 60,000 VND for a drink. University
students and young professionals in the area fall within varied income levels. While
students may have limited budgets, young professionals typically possess moderate to
higher disposable incomes. Their spending patterns range from moderate to moderate-
high, with a willingness to allocate a portion of their budgets for quality beverages and

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occasional treats. This demographic also comprises local residents and commuters
who pass by our location during their daily routines.
Understanding the lifestyle choices of this demographic is vital. They are often tech-
savvy, with a preference for digital ordering and payment options. Our coffee shop
will cater to this by offering seamless digital services.
In terms of cultural preferences, they appreciate variety and quality. We will offer a
diverse menu, including both local and international coffee selections, in line with
their cultural openness. We will also provide options for non-coffee drinkers, such as
specialty teas and snacks that align with local tastes.
Socially, they engage in gatherings with friends and colleagues. We will create a cozy
and inviting ambiance with comfortable seating arrangements that accommodate
groups.
Taking these lifestyle, cultural, and social factors into account, we aim to provide a
coffee shop experience that resonates with the preferences and behaviors of our target
demographic. This comprehensive understanding will guide our menu, service, and
atmosphere to ensure a strong appeal to this market segment.

c. Suppliers
Suppliers for our coffee shop can vary based on the specific needs of the business.
Here are some typical suppliers that our business may engage with:
 Coffee Beans Suppliers: Coffee is the heart of a coffee shop. Coffee shops can
source beans locally from coffee farms in Vietnam or import high-quality beans
from other regions. Some well-known local coffee bean suppliers in Vietnam
include Trung Nguyen, Vinacafe, or local coffee cooperatives.

 Dairy and Milk Suppliers: For various coffee-based beverages, including

cappuccinos and lattes, a coffee shop would need a supplier for fresh milk,
creamers, and other dairy products. Vinamilk is a prominent dairy company in
Vietnam.

 Bakery and Pastry Suppliers: Many coffee shops offer pastries and baked
goods. We might source bread, croissants, cakes, and pastries from local
bakeries or suppliers like ABC Bakery or Maison Marou.

 Tea and Beverage Suppliers: If your coffee shop offers a variety of teas or
other beverages, you'll need a supplier for these items. Companies like Phuc
Long Tea or Hatvala are popular choices for tea in Vietnam.

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  Packaging Suppliers: To-go cups, lids, napkins, and other packaging materials
are essential if you offer takeaway options. Hanoi packaging company is our
main supplier.

 Local Markets: Depending on the coffee shop's location, we might also

consider sourcing fresh fruits, syrups, or other local ingredients from nearby
markets or vendors.
It's important for coffee shop owners to establish good relationships with their
suppliers to ensure the quality, consistency, and reliability of the products they receive.
Additionally, consider the sustainability and ethical practices of your suppliers, which
can be a selling point for environmentally conscious customers.

d. Competitors
Our potential competitors could be:
 Local Independent Coffee Shops: Hanoi has a vibrant coffee culture with
many local, independent coffee shops that are popular among locals and
tourists. These coffee shops often offer unique, traditional Vietnamese
coffee blends and cozy atmospheres.

 International Coffee Chains: Global coffee chains like Starbucks, Costa

Coffee, and The Coffee Bean & Tea Leaf have a presence in Hanoi. They
compete by offering standardized international coffee options.

 Local Chain Cafes: Some local cafe chains, such as Cong Caphe and
Highlands Coffee, have a significant presence in Hanoi. They offer a mix of
traditional and modern coffee options.

 Specialty Coffee Shops: Hanoi has seen a growth in specialty coffee shops
that focus on high-quality, artisanal coffee. They often source their beans
from specific regions and use various brewing methods.

 Bakeries and Dessert Cafes: Places that serve pastries, cakes, and desserts
often include coffee in their offerings, potentially drawing customers away
from dedicated coffee shops.

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  Tea Shops: While coffee is popular, tea remains a significant beverage in
Vietnam. Tea shops that offer a variety of tea-based drinks can be
competitors.

 Local Eateries and Street Vendors: Local restaurants and street vendors
often serve coffee alongside their food offerings, providing convenience to
their patrons.

 Co-Working Spaces and Libraries: Some co-working spaces, libraries,

and bookstores offer coffee to their members or visitors, providing an
alternative space to enjoy coffee while working or studying.

 Online Coffee Retailers: With the growth of e-commerce, online retailers

selling coffee beans and equipment can also be indirect competitors,
especially if they offer delivery services.

 Neighborhood Competitors: Depending on your coffee shop's location in

Hanoi, you'll also compete with nearby coffee shops and cafes that cater to
the local community.

2. Related Cash Flows

2.1. Unrelated Cash flows are:
a. Advertising cost: 500.000.000
Since the human resources of our Coffee Shop is limited, we outsource the marketing
activities with the cost of 500.000.000 for 5 years. The Marketing activities of our
business, therefore, will be conducted by a Marketing Agency called Biss Brand.
 Manage and take care of fanpages: Implement activity optimization and reach
out to customers. Improve single sales rate at low cost and bring high
efficiency. Having a clear commitment to transparency
 Facebook and Google Advertising: Implement campaign optimization to
increase potential customer coverage and complete orders at low cost. Clearly
commit to and use clean combat, account protection, and pages for customers
 SEO services: commitment to keyword ranking (top 1, top 5, top 10), page
optimization, technical auditing, SEO standard articles. Establishing high-
quality backlinks

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  Professional graphic design: Design banners, Facebook covers, product
packaging, catalogs, and other images.
 Google Map Validation: Display complete business information on Google to
increase visibility and coverage
 Develop a marketing plan: conduct research and communicate the correct
content to potential customers

b. Reconstructing and decorating cost: 172.000.000

c. Outsourcing to 20s Factory

Painting and decorating 50,000,000

Install water and electricity systems 15,000,000
Equipped with cashier counter 15,000,000
Dispensing cabinet 25,000,000
Cash register 10,000,000
Signs 7,000,000
Furniture 50,000,000

2.2. Related Cash flows are:

 Current value of the coffee shop is: 252.459.312VND (if we had not run the
business and put 180.000.000 in bank saving account for 5 years, and the
interest rate is 7%/year)

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  Machine, Equipment: 485.000.000 VND ( depreciated according to ACRS 5-
year life). After 5 years the machine is expected to be sold for 80.000.000
VND.

Item Total costs Units

Coffee maker (25 million/pcs) 125,000,000 5
Coffee grinder (5 million/pcs) 25,000,000 5
Blender (2 million/pcs) 50,000,000 5
Fridge (11 million/pcs) 22,000,000 2
1 set of Cups, glasses, coffee filters (4
240,000,000 60
million/set)
Rapid boil kettle (2 million/pcs) 8,000,000 4
Loudspeaker (5 million/pcs) 15,000,000 3

 Raw materials: 780.000.000 VND for 5 years (156.000.000 each year)

According to the statistics, in normal condition, on average, each coffee shop is able to
sell 150 to 200 cups of drink at an average price of 35.000 VND per serve. Assume
that our coffee shop selling volume is about 150 units per day

Item Total costs Cost/month

Coffee beans (import Lam Dong coffee beans with
120,000,000 2.000.000
current price of about 50.000vnd/kg)
Rich/Base/Vanilla ice cream (30.000vnd/454g/box)
60,000 1.000.000

Unsweetened fresh/Condensed milk (Ong tho

90,000,000 1.500.000
Condensed milk - 25.000/380g)
Cocoa powder (100.000/226g)
90,000,000 1.000.000
Matcha powder (150.00/100g)
Dark chocolate/caramel sỷrup (75.000/kg) and
120,000,000 2.000.000
(225.000/kg)
Fruit syrup 300,000,000 5.000.000

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  Labour costs: 4.500.000.000 VND for 5 years. After consulting Vietnam's labor
market price in 2023, our team see that manager salaries fluctuate from 14.4 -
15 million VND/month while accountant wages can be lower, around 10 -11
million VND/month. For some other positions such as security guards and full-
time employees, we pay salaries based on the number of years of experience.

Salaries: 75.000.000 VND per month

o 1 manager: 15.000.000 VND/month
o 1 accountant: 10.000.000 VND/month
o 2 full-time bartenders: 20.000.000 VND/month
o 1 security guard salary: 9.000.000 VND/month
o 3 full-time staff: 21.000.000 VND/month

 Utility Expenses: 600.000.000 for 5 years

Utility Expenses is 10.000.000 VND per month
The cafe's electricity, water and Internet prices are estimated based on the
average monthly value of Hanoi Clean Water Limited Company.
o Electricity: 6.000.000 VND
o Internet: 2.000.000 VND
o Other expenses: 2.000.000 VND

 Cost of rent: 1.875.000.000 VND (5 year).

We have done some research and found out that the cost of renting a 100m 2 area on
Ta Quang Buu Street, Hai Ba Trung, Ha Noi is about 31.250.000VND per month.
 Additional investment in inventory: 200.000.000VND (5 years). Inventories in
coffee shops are mainly items that revolve around imported and exported
materials. We estimate the cost for these items to be about 40 million VND/year
based on availability, some tax policies in the region and the industry's
development potential.
 Price during the first year is 40.000 VND, and the price increases 1% per year
thereafter.
 Sales (in units) during 5-year life: 40.000; 54.000; 55.000; 60.000; 52.000
 Corporate income tax is 35%.

3. Operating Costs
3.1. Depreciation:

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  For machines and equipment, we use the modified accelerated cost recovery
system (MACRS) to identify the depreciation cost in 5 years. The original cost
of the machine and equipment is 485.000.000VND

3.2. Operating Cash Flows:

 Sales in 5 years:
o Year 1: 1.600.000.000VND (Sale volume is 40000 units. The price of drinks
in year 1 is 40.000 VND)
o Year 2: 2.181.600.000VND (Sale volume is 54000 units. The price of drinks
in year 2 is 40.400VND)
o Year 3: 2.244.220.000VND (Sale volume is 55000 units. The price of drinks
in year 3 is 40.804 VND)
o Year 4: 2.472.722.400VND (Sale volume is 60000 units. The price of drinks
in year 4 is 41.212VND)
o Year 5: 2.164.456.341VND (Sale volume is 52000 units. The price of drinks
in year 5 is 41.624VND)
 Rent cost, salary expense, utilities and raw materials expenses each year are
375.000.000, 900.000.000, 120.000.000, 156.000.000 respectively
 Therefore, total operating expenses is the sum of rent cost, salary expense,
utilities and raw materials 375M + 900M+ 120M + 156M = 1551M each year
 Depreciation cost is recorded in 3.1 above
 Income before tax = Sales - Total Operating expenses - Depreciation cost
o Income before tax for Year 1 is: - 48.000.000
o Income before tax for Year 2 is: 475.400.000
o Income before tax for Year 3 is: 600.100.000
o Income before tax for Year 4 is: 865.850.400
o Income before tax for Year 5 is: 557.584.341
After a loss of 48.000.000VND in year 1, our firm would be able to get the
profits in the following years.
 Tax = Income before tax * 35% Corporate income tax
 Operating cash flow = Depreciation + Net Income

4. Total Cash Flows

In the beginning year (year 0), the firms incurred Machines and equipment cost of
485.000.000VND. Because our firm chooses to open the coffee shop rather than save
money in a bank account, the opportunity cost is 252.459.312VND. Additional
investment in inventory of 200.000.000 VND (5 years). So, the total cash flow of year

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0 is 937.459.312VND. In the next 5 years, there is no other cost incurred rather than
the operating cash flow.

5. Project Evaluating
Due to the impact of the Russia-Ukraine war and global supply chain bottlenecks
during the Covid-19 pandemic, inflation has continued to rise worldwide. The price
escalation puts great pressure on most major economies to raise interest rates, thereby
putting the global economy at risk of recession.

Currently, inflation, tightening monetary policy and the consequences for growth are
"hot" topics in developed economies as well as emerging and developing economies.
The Financial Times has a series of charts reflecting price correlations between
economies around the world.

Vietnam has a relatively low inflation rate. Data collected by the Financial Times from
official statistical sources and from Refinitiv shows that in September, inflation in
Vietnam was 4%.
Meanwhile, savings deposit interest rates of some Vietnamese banks are currently
fluctuating at 5-6%.

Thus, our group choose discount rate is 10%, ensuring a balance between inflation and
savings in the market.
 Using the NPV analysis method, total NPV is equal to 870.623.910. This
NPV is positive, therefore, the project should be accepted
Project Evaluating
6. Appendix

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