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Revenue:

There are two sources of revenue for Shopko. The first source being the annual membership fees of $10 and the second source is 5% commission received on sales of books through the website.

• We have assumed that the total number of membership in the first year will be 6,000 and will increase by 50% to 9,000 in 2009 and further increase to 12,000 in year 2010. After 2010, there will be huge competition in the market and the growth will slow down to 10% per annum. Therefore the membership for 2011 and 2012 is expected to increase by 10%
  
  
• We expect total college students at 15,000 in year 2008 and assumed that these numbers will grow at 10% every year constantly over a period of next five years.
  
  
• 60% of the total college students in 2008 purchases books from college campus and this number will decline each year by 5%, who will move to other sources of purchases.
  
  
• Out of the total students who purchases books from other soures, 4% in 2008 will purchase all their requirements from Shopko. This percentage will increase to 7% in 2009 and then 15% in 2010. With increased competition in 2011 onwards the number will decline by 10% each year.
  
• Cost of total books purchased by each student in 2008 will be $900, which is expected to increase by 5% annually.

Expenses:

• Start up cost of $57,700 is all incurred before the operations actually start and this does not include any expense related to operation for 2008.
  
  
• Salary of one full time and part time employee will be $28,000 and $14,000 respectively in 2008 and there will be an annual increase of 10%.
  
  
• Owner will draw a salary of $25,000 annually and this will remain fixed over the period.
  
  
• One new computer will be purchased in 2009 at $4,000.
  
  
• Computers will have a useful life of 5 years and will be depreciated over the period on straight line method.
  
  
• Furniture costing $7,500 will be purchased at the start of the business and will be depreciated over a period of 10 years on straight line method.
  
  
• Web hosting charges of $1,000 will be paid in 2008 and this expense will increase by 20% annually.
  
  
• Administrative expenses are assumed to be 10% of total revenue for the year.
  
  
• All start up expenses will be charged to profit and loss account in the first year of operation.
  
  
• Income tax will be charged at 30%.