Feasibility study of establishing a vegetable and fruit trading post in Tiaong, Quezon

Date

2006

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Arrienda, Faustino Q.

Abstract

The primary objective of the study is to investigate and evaluate the investment viability of establishing vegetables and fruits trading post in Tiaong. Quezon with the main objective of making a decision regarding its investment viability and possibility. Generally, a comprehensive analysis of the strategies and problems was presented descriptively. The four business functions were evaluated and analyzed individually. For the quantitative analysis, overall financial picture in terms of operating cash requirements, and cash flow were presented. The capital budgeting techniques were also computed. In general, farmers in Tiaong assemble their produce at the farm level prior to transport to the much bigger assembly area where buyers and sellers meet. In this case, a trading post will serve a very important function in marketing of the vegetables and fruits coming from the different production areas. It will serve as an important market where supply and demand find an equilibrium price. The area covered in the study is Tiaong, Quezon. This municipality is part of the Cantissad, 2nd district Quezon, which stands for Candelaria, Tiaong, Sariaya, San Antonio, and Dolores. More than 50% of the production of vegetables and fruits in the Province are coming from these areas. But the marketing system for vegetables and fruits in these areas are mirrored by the low income received by the farmers and high price paid by the consumers. The establishment of a vegetable and fruit trading post in Tiaong, Quezonwas conceptualized to provide a direct market linkage between farmers and consumers within the 2nd district of the Quezon province. The project will befunded by a 53 - year old businessman named Eufronio Arellano Gonzalvo. He id currently residing at Barangay Lagalag, Tiaong, Quezon and has already for the past 15 years been managing his different business. Due to the unorganized marketing system of the vegetables and fruits in the area, Mr. Gonzalvo, who is also related to many farmers in this area, became interested in venturing in a vegetable and fruit trading post. He envisioned that investing in this kind of business has really a market potential. The supply of vegetables and fruits in the trading post will be coming from the five municipalities within the second district. the trading post can be able to cater demand of the wholesalers, wholesales-retailers and retailers of these municipalities, as well as the demand of the nearby city of San Pablo- the wholesalers, wholesalers-retailers, and retailers of vegetables and fruits, and also the institutionalize markets and food chains. The proposed trading post will be constructed in a 2,264.13 sq. m. (0.23 hectare) land located in the town proper in Tiaong Quezon. The vegetables and fruits trading post will serve as buying and selling station of selected agricultural crops products by farmers in the 2nd district of Quezon. Services of the trading post will be on linkages between buyers and sellers and market information. The management of the trading post will up to the farmers association within the 2nd district of Quezon to ensure supply of vegetables and fruits of the trading post for smooth flow of the operation. Sufficient funds will be maintained to ensure the smooth implementation of the program. Source of capital will be coming from a financial institution that is really supporting market linkage projects. The trading post will be owned and managed by a family owned corporation who will also provide the necessary funding, with the help of bank loan, and operational management of the trading post. The total investment required for the project amounts to P3,000,391.00, in which 50% will be coming from the proponents equity and the other 50% will be loaned. Operating expenses totaled to P303,.82.08 per year and salaries and wages amount to P875,301.96 per year. The net present value (NPV) using the discount rate of 14% is P3,809,269.15. The NPV of the project being greater means that the project is worth undertaking. The projects internal rate of return (IRR) is 44%. Being greater than the discount rate, it is further proven that the project is worth undertaking. The payback period of the project is 2.17 years. This just proves that the project is really feasible. Three scenarios were done in the project to determine whether it is capable of surviving under such conditions. Also, the sensitivity analysis was done to determine the behavior of the trading post's responses to various changes in its environment. As shown in the three scenarios, the trading post is very sensitive to the changes on the environment. In the first sensitivity test, the project was subjected to 4.15% decrease in its revenue but no changes in its expenses. The project is still viable with a with the positive NPV of P27,202.61 and an IRR of 15%. The payback period increased to 2,44 years. This is the lowest possible decrease in revenue that the trading post has to encounter. In the second sensitivity test, the project was subjected to 5.5% increase in its expense and revenues will remain constant. The project still yields a positive NPV of P35,734.81 and an IRR of 15%. The payback period became 2.44 years. In the third sensitivity test, the project was subjected to 2.75% decrease in its revenue. 2.75% increase in expenses. The project has an NPV of (P29,652.45) and an IRR of 13%. This means that beyond the percentage increase and decrease given in the third scenario, the trading post might not be able to operate due to negative NPV and 0% IRR. The payback period is 2.52 years. The study recommended that the project shoul be implemented because of its feasibility and viability.

Language

English

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2006 M17 A77

Document Type

Thesis

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