Part 1 – More of the Basics and Beyond
Using the same business you started in Assignment 1, you will continue to build a
financial plan for the business. My business venture is a Vehicle Saloon (car wash)
Write a four to five (4-5) page paper in which you:
Prepare a pro forma balance sheet for the first twelve (12) months of your
business. Include the assumptions on which it is based. Justify your balance
sheet.
Prepare a pro forma income statement for the first twelve (12) months of your
business. Include the assumptions on which it is based. Justify your income
statement.
Prepare a pro forma cash budget for the first twelve (12) months of your
business. Include the assumptions that you have made when creating the
budget. Justify your budget.
Scrutinize the costs (both tangible and intangible costs) of obtaining financial
capital for your business start-up to determine whether the costs justify
implementation of the funding source.
**Note – Your business is five (5) years old and running profitably. You are now ready to
look outward five (5) more years to take the business to the next level.
Determine the specific details that would make the equity approach to valuing your
business worthwhile. Provide a rationale with your response.
Part 2 – Financing an Expansion
After twelve (12) years, your business is wildly successful with multiple locations
throughout the region. You are now ready to think really big. You want to purchase a
huge competitor. (Note: You determine whether the competitor is a privately or publicly
held company.) To expand, you will need additional capital from the debt or equity
market, or both.
Write a five to seven (5-7) page paper in which you:
Use one (1) of the valuation techniques identified in Chapters 10 and 11 to
calculate the value of the competitor you wish to purchase. Note: You will have
to make assumptions; however, your assumptions need to be rationally
supported.
Analyze the various financial tools available to you to determine the tools that
will be most helpful in assessing whether your company can afford to purchase
the competitor. Support your response.
***Imagine you can indeed afford to purchase the competitor; however, you will need an
additional $100 million.
Examine the options available to you to finance the competitor through the debt
market, recommending the best alternative as a result of your analysis. Provide
support for your recommendation.
Examine the options available to you to finance the competitor through the
equity market, recommending the best alternative as a result of your analysis.
Provide support for your recommendation.
Conduct a cross comparison of your debt and equity examinations to determine
where to ideally obtain the additional $100 million funding needed to make the
purchase and the approach that you would take to securing the funds. Provide
support for your recommendation.
