AFIN832 Case study 1: Star River Electronics Ltd

The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) .

6. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

(TCO C) Debt securities sold to investors that must be repaid at a particular date some years in the future are called:

It is clear at first glance of the cash budgets that if the projections prove to be accurate, the firm will remain in good shape. It is important to note that the cash budgets provided assume a loan from the bank of $200,000 at 15%. A loan of $200,000 was chosen because it is always better to over-finance the business than to under-finance it especially in its first year of operations where sales and expenses are so volatile and could prove to be quite inaccurate. If a loan of only $150,000 or even $100,000 is secured by Robert & Alex, they should still be able to stay afloat, although they will have a harder time paying off some of the principal of the loan in the opening

Returns: The company will plan to repay its loans after 5 years, which would give it enough time to assess its growth and gather profits from the computers that it sells. This initial revenue would cover building rent costs, equipment, wages, interests, and all the factors necessary for starting this company. Once the loans have been repaid, the ongoing expenses left will be for wages, maintenance, and

Du Pont's financial policy had always been based on maximization of financial flexibility. Taking to consideration the riskiness of Du Pont's businesses, its competitive position and profitability had declined in the last 20 years. Moreover, the firm is still forced to seek external financing each year for the next five years (1983-1987) due to the continued high level of capital expenditures which are considered non-deferrable to redress the causes of poor performance. In view of the importance and magnitude of the projected financing needs, the firm is concerned about how the cost and availability of debt

Evaluate two (2) key changes in the selected company’s management style from the company’s inception to the current day. Indicate whether or not you believe the company is properly managed. Provide support for your position.

This Feed Processing Company is in a content place for financial condition. Perhaps the best strength is the debt to equity ratio. The ratio of it falls within the ideal range, meaning it will be easier to get a loan for needs that are in the short term. The profit on sales percentage of this business is at a good number with 5.7%. This means that the company will be making money, which in turn will keep this business thriving.

As the head of credit of a bank, our main issue in lending $1 billion to Carnival Corporation for a long-term period is to ensure that Carnival Corporation is able to maintain a sound financial condition for the period of the loan. For such a loan to be approved, the capital structure and long-term solvency of Carnival Corporation need to be analysed.

Due to reduced profitability in the company, a new CEO was brought into the company 12 months ago. While the company has improved its profit growth in the last year, many of the changes have not been met with agreement from some of the senior management team.

Based on the details in the case, the bank has asked Pacific Grove to provide an action plan by June 30th. The action plan should provide details on how they will reduce interest-bearing debt to less than 55%, which is currently at 62%. The bank would also like for Pacific to reduce its equity multiplier from 3.47 to 2.7. The case presents that their expected future growth plan is 15%, 13%, 11% and 9% for year 2012, 2013, 2014 and 2015 respectively. Based on the projected income statement and balance sheet provided in the case, displays that Pacific Grove will get closer to meeting bank’s requirements by end of 2015. This information can be seen in Exhibit 1, which shows that Pacific Grove’s interest bearing debt by 2015 will be 55% and equity multiplier will be 2.77.

While forecasting the assets part of the balance sheet we saw that Mr. Butler continually trying to lower his cash position as a matter of fact reduction in cash relative to sales went from 3.41% in 1988 to 2.38 to 1.52! In this illustration we see a reduction of over 30% from year to year. However we realize that such reduction rate is impossible to have for prolonged period of time we are going to assume an additional 10% reduction bringing our cash to about 1.37% of sales. Further we are assuming the A/R and inventory to be the same relative to sales and property to remain the same as last year since no purchases or construction were

In the following analysis, we choose profit margin ratio for to analyze profitability and debt to equity ratio to analyze financial structure.

Fishy Foods is a take away restaurant that established in 2010. The company has been running well but has been they have noticed that there are less customers wanting their product. However the company is positive for the future and has been offered a bank loan from a bank manager and now have to consider what they want to do with the loan.

Net working capital,,"90,400.00","90,400.00","90,400.00","90,400.00","90,400.00" Net Operating Cash Flow,,"310,000.00","322,000.00","340,000.00","358,000.00","382,000.00" After tax value,,,,,,"240,000.00" Net Cash Flow,,"310,000.00","322,000.00","340,000.00","358,000.00","622,000.00" Present value factor @ 14%,1.0000,0.8772,0.7695,0.6750,0.5921,0.5194 Present Value,"-870,000.00","271,932.00","247,779.00","229,500.00","211,971.80","323,066.80" Net Present Value,"2,154,249.60",,,,, IRR,14%,,,,, Payback period,2 years + ((340000 - 238000)/340000 )*12,,,,, ,2years 3.6 months,,,,,