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FF&E Amortization in the Business Plan....

Nanda K. Kuppusamy CPA,CMA,CGMA's Profile

I am writing a Business Plan and the focus is, how funds spent on expenses ( Such as Salaries & Benefits to Educators, Computers, Furnitures,Fixtures & Equipment- FF&E) will increase the student population. In the first year I will be showing the FF&E purchases as a cash outflow. In subsequent years , Can I include FF&E yearly amortization amounts in my Business Plan ? OR Should I consider FF&E costs as sunk cost and consider only incremental costs/benefits in the subsequent years.? Thanks for your insights and inputs. Nanda

Answers

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Most business plans only consider EBITDA, with adjustments coming to a Free Cash Flow (FCF) number. Expenditures for fixed assets would be one of the adjustments for FCF.

In this instance, you would consider the initial purchase of FF&E as your investment, then future Capital Expenditures as an adjustment to EBITDA to come to FCF.

You can use your FCF to calculate all sorts of financial stats such as IRR, ROI, Payback Period, Free Cash Flow Return, etc.

Are you considering the revenue produced by the new students in your business plan?

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