...Venture Budgeting and Forecast Paper Kathleen Jones FIN/375 March 9, 2015 Leon Daniel, Jr. Venture Budgeting and Forecast Paper Building a business from the ground up will involve startup costs, such as a patent for the name and logo, advertising, site for the business, improvements that need to be done to the site, legal fees, insurance, starting inventory and equipment, financing, and cash. The first step to opening the business would be to purchase the building that would serve as both the studio and shop. There is a warehouse type building for sale for $60,000 on Main Street where there is heavy daily traffic, which would be an ideal spot to generate traffic into the shop. The building will be mortgaged at a 3.75% fixed interest rate for 10 years, with a down payment of $5000 and a payment of $607 a month. I have purchased the building with the intention of remodeling the lower front for the shop, which has been estimated at $15000.00. The rest of the building will be used as a studio, holding the equipment for crafting the $500 and insurance has been purchased totaling $10000 for the year. I have estimated inventory at a cost of $50000 as it has been accumulated over years. Equipment to recycle, clean, fix, and craft the jew elry has been estimated at $5000, with operating supplies estimated at $10000. Utilities, such as telephone and electricity, will incur costs that have been estimated at $4600 per year. Taxes on the land and building were...
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...Summary - If you Build it, will they come?? Innovation and new Ideas are valuable and change the prospective of any Industry however before jumping to conclusion it is important to know the market and analyze if there is market and if the space if profitable enough. As explained in book, most of the startups fails because they do not test market early on and concentrate on product and idea than the feasibility of it. To succeed the same, the author defines a process “Ready, Aim and Fire”. I will an example of consulting company who works with two financial angles first is to work with entrepreneurs and incubator companies with a percentage of share and second to work with middle sized companies with direct money transactions. READY First is to understand the market on multiple fronts including size, growth rate, emerging trends, competitors and expert viewpoints. All these factor are essential in understanding the concept and underlying idea. As stated by Steven Johnson in “Where good idea come from”, “The trick to having good ideas is not to sit around in glorious isolation and try to think big thoughts. The trick is to get more parts on the table.” To bring new part you don’t only need to understand what is already on the table and what competitors are doing to bring something new. Example: The more players an industry has more consumer friendly it becomes. It not only give power to customers but it forces organizations to distinguish themselves. To improve the customer...
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...preferable to a larger project that will generate more cash. * Applying NPV using different discount rates will result in different recommendations. The IRR method always gives the same recommendation. (Wilkinson 2013) It makes this adjustment using a "discount rate" that takes into account inflation, the risk of the project and the cost of capital -- either interest paid on borrowed money or interest not earned on money spent to pursue the project (Opportunity cost). Under the payback period method, a company estimates how much it will cost to launch the project and how much money the project will generate once it's up and running. It then calculates how long it will take the project to "break even," or generate enough money to cover the startup costs....
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...Tiffany White March 19, 2015 Business 3062 Fundamentals of Finance Unit 5 Assignment 1 Capital Budgeting Measurement Criteria 1. Describe the Net Present Value (NPV) method for determining a capital budgeting project's desirability. What is the acceptance benchmark when using NPV? Net Present Value (NPV) method for determining a capital budgeting project’s desirability is by computing the difference between the present values of a project’s cash inflows and outflows. Since this calculation includes the necessary capital expenditures and other startup costs of the project as cash outflows, a positive value indicates that the project is desirable that it more than covers all of the necessary resource cost to do the project itself. The acceptance benchmark when using NPV would accepting both inflows and outflows which means anything greater than zero represents value above and beyond the investment. 2. What is the payback period statistic? What is the acceptance benchmark when using the payback period statistic? The payback period statistic is something in which you break even calculation for the costs of financing a new project. We run the subtotal of the cumulative sum of the cash flows up to the point that this sum exactly offsets the initial investment. The acceptance benchmark when using the payback period statistic could vary in different situations. It’s normally based in on the relevant external constraint. Chapter 13 gives an excellent example of “assuming that we have...
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...Week 10 Discussion 1 From the scenario, suggest one (1) method in which Herb could use a cost-benefit analysis to argue for or against an expansion. Create three (3) optimal decision rules for Katrina’s Candies (e.g.., whether to hire more staff or hire temporary workers to meet production schedules). The cost-benefit analysis that Herb could use to argue for or against an expansion would be the Net Present value method. Net Present Value (NPV) is the present value of net cash inflows generated by a project including salvage value, if any, less the initial investment on the project. It is one of the most reliable measures used in capital budgeting because it accounts for time value of money by using discounted cash inflows. The Net Present Value relies on the concept of opportunity cost to place a value on cash inflows arising from capital investment. Opportunity cost is the calculation of what is scarified or foregone as a result of a particular decision. It is also referred to as the “real” cost of taking some action. It relies on the concept of opportunity cost to place a value on cash inflows arising from capital investment. Present value is the cash equivalent now of a sum receivable at a later date. If we didn’t spend that money and banked it instead, the opportunity cost includes both the initial sum and the interest earned. The Net Present Value method is a technique where cash inflows expected in future years are discounted back to their present value. This...
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...credit cards (9% and 4%)? -----This is because they want to get or make as much revenue as they could. You find that with low credit card rate they actually get a lot of customers who sign for the credit card since the interest rates are considerably low. What process would you use to estimate these discount rates to see if they are reasonable? - I would choose the IRR, NPV and the discount payback method to estimate 2. What is Targets Capital-budgeting process? -The Capital Expenditure committee said that the budgeting process would be to annually build 100 more stores while still maintaining an appealing image to the customers. This means that the loyal satisfied base would be retained and the company improving on its operating profits of 26%. The Targets operating earnings would also see an improvement and thus be integrated with the company’s overall strategy by focusing only on customers who visited Targets stores. Is it consistent with the company business and financial objectives? The Capital budgeting method is in line with the company’s business and financial objectives 3. Which of the five CPRs did you accept? Which project attributes did you consider as part of your decision? * I chose the Whalen court Capital Project request. This is because the location had the largest percentage of college educated people compared to other projects after carefully reviewing exhibit 7. Because Targets wants the college educated mother with children as the ideal...
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...Industry Introduction: The newspaper industry has a long history in US. It is considered to start in Boston in 1690, when Benjamin Harris published Publick Occurrences both Forreign and Domestick. Its product, newspaper, is a periodical publication containing news of current events, informative articles, diverse features, editorials, and advertising. It usually is printed on relatively inexpensive, low-grade paper such as newsprint. The newspaper industry now has annual revenue of 33.8billon, of which 2.5 billon is profit. It’s annual revenue growth during 07-12 is -8.1%, and annual growth anticipated for the next five years is -4.2%. Recent revenue comes mainly from advertising, with 69.9%, and others from sales and subscriptions 25.1%, printing services 2% and miscellaneous 3%. Recent major market is readers aged 55 or over 39.9%, readers aged 35 to 54 35.6%, and readers aged 18 to 34, 24.5%. Three major players in the industry are Gannet, Co. Tribune, and The New York Times. The Newspaper Publishing industry faces escalating competition from other forms of media, particularly digital outlets. Consumers favor the real-time reporting capabilities of online news, including social networking platforms like Twitter. As a result, advertisers are spending less money on print and more on building their online presence, where they can create customizable campaigns and reach a wider audience. By 2007, there were 6,580 daily newspapers in the world selling 395 million copies a day...
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...Management Control: Budgeting and Variance Analysis TJ Wicker TJ Wicker Kaplan University Chapter 8 Question 8.1 Why are planning and budgeting so important to an organization’s success? Planning and budgeting both play a critical role in the finance functions of all healthcare service organizations. In fact, on could argue (and usually win the argument) the planning and budgeting are the most importnat of all finance related tasks. Planning encompasses the overall process of preparing for the future. Because of tis’ importance to organizational success, most health services managers, especially at large organizations, spend a great deal of time on a=activities related to planning. Budgeting is an offshoot of the planning process. A set of budgets is the basic managerial accounting tool used to tie together planning and control functions. In general, organizational plans focus on the long-term big picture, and through the control mechanism, ensuring that current performance is consistent with organizational plans and goals. Question 8.2 Briefly describe the planning process. Be sure to include summaries of the strategic, operating and financial plans. 1. Goal setting: Plans are the means to achieve certain ends or objectives. Therefore, establishment of organizational or overall objectives is the first step in planning. Setting objectives is the most crucial part of planning. The organizational objectives should be set in key areas of operations. The objectives...
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...changes, the corporation will continue on. The name associated with this business will provide clothing, shoes, and accessories such as: hats, handbags, belts, and jewelry to service young ladies from birth into adulthood, in all shapes and sizes. Jadechey is derived from the combination of my daughters names, with whom can relate to my products. This store will be the largest ladies only retail store in the Chicago land area with low price items but in high quality specifically for those on a budget. Accounting will be the foundation of my business, helping to aid me in making better decisions that my business will come to face. Accounting takes on several roles: providing a clear picture of the financial condition of my business, budgeting, calculating tax liability, financial reporting, and financial auditing. Because this business is in retail, we will be dealing with cash and credit card transactions. Accuracy in accounting is extremely...
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...To: Professor Date: 07/20/2015 Subject: Organizing a Business Business Brief As a nursing home administrator, I have the knowledge and history required to understand how healthcare organizations run. I have a passion for seniors, and ensuring they are well taken care of. As an administrator in the healthcare field, I strive for quality care and I am familiar with how to manage these types of facilities. With that being said, I would like to own a greenhouse nursing facility. Why Greenhouse Nursing While nursing homes provide long term, and in some cases short term, nursing care to residents, many people have negative conceptions about nursing homes. Unfortunately, many times nursing homes neglect to provide choice and freedom to residents. A greenhouse nursing facility provides similar services to their residents, such as nursing care and assistance with daily living. However, every other aspect is much different. Rather than providing these services in a large facility with fifty to two hundred beds, a greenhouse nursing facility only provides care to five to ten residents at a time. This allows more personalized, individualized care. These facilities are actual houses, rather than institutionalized buildings. I would love to own one of these houses. I have the healthcare knowledge to own/operate a facility like this. I am passionate about this kind of work, and would like the opportunity to give seniors a better quality of life. This greenhouse, perhaps...
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...Expanding Abroad: Is it Worth the Effort Owning and operating a business is not something that comes easily to most people, after all many businesses struggle to keep afloat in their own country forget about opening a business overseas. Running a business can be a challenge especially trying to do it from a different country. There are many things that you need to take into consideration such as language barriers, currency exchange and customs to name a few. Many entrepreneurs look to the international market because they have lower startup costs and there is less business around to compete for startup costs. This by no means makes starting a business overseas easy however; there are definitely tricks to the trade. As with anything there are challenges, setting up an international business takes a lot of time and could potentially take longer than a business started in your own country. Dealing with the international laws and tax regulations is a job in itself. A lot of thought needs to be put into starting the business as there are far more things to think about such as transportation, utilities, internet speed and economic stability. Not many people would think about it but traffic and transportation are huge things to consider. Traveling three miles to the office in the United States which takes ten minutes could take easily three hours while in another country. Opening a business in unfamiliar territory certainly opens up a myriad of roads to be traveled and the possibilities...
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...Caledonia Products Integrative Program FIN 370 - Finance for Business |Operating Cash Flow |Year One |Year Two |Year Three |Year Four |Year Five | |Project Revenue |$21,000,000 |$36,000,000 |$42,000,000 |$24,000,000 |$15,600,000 | |Cost of Goods Sold |($12,600,000) |($21,600,000) |($25,200,000) |($14,400,000) |($10,800,000) | |Fixed Costs |($200,000) |($200,000) |($200,000) |($200,000) |($200,000) | |Gross Profits |$8,200,000 |$14,200,000 |$16,600,000 |$9,400,000 |$4,600,000 | | | | | | | | |Depreciation |($1,600,000) |($1,600,000) |($1,600,000) |($1,600,000) |($1,600,000) | |Net Operating Income |$6,600,000 |$12,600,000 |$15,000,000 |$7,800,000 |$3,000,000 | | ...
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...growth, capital budgeting. The Chief Financial Officer (CFO) of TaxCats, a struggling tax preparation company is assigned to fix the problem and help with the company’s cash flow. The company still has a positive cash flow, at best it is minimal. Unless there are changes done at the company, it will go under soon. Luckily, the product development department has recently created a new product that will revolutionize how the industry does business. The only problem is that the product is still two years away from being able to be sold to the public, and the company’s cash will run out within the next six months. Obtaining Funding According to Goins and Little (2014) the first source of funding look at when searching for additional funds is crowdfunding. Crowdfunding allows for a smaller pool of investors to fund the company with less restrictions. It is allowed under the JOBS Act that launched January 1. It is geared towards the early stages of business and can be combined with venture capital funding. It can ideally be used in the early stages of a business, especially if you don’t qualify for a bank loan, and don’t have angel or venture capital funding. Additionally, according to Buol (2013) with crowdfunding, individuals can contribute small amounts via online campaign, started in the late 1990s and has been used to fund bands, movies, art projects and inventions. The Jumpstart Our Business Startups (JOBS) Act signed in April 2012 opens the doors for startups to solicit equity...
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...CASE 9-1: NEW YORK TIMES 1. Describe NYTD’s evolution to date. What is strategy of NYTD? Are the organization and control consistent with the strategy? Evolution: New York Times first ventured into the Internet in 1995. Back then, the company was called the New York Times Electronic Media Company. In 1999, a new operating division, Times Company Digital, was created, which reported directly to corporate management. The new division included NYTimes.com, Boston.com, NYToday.com, GolfDigest.com, WineToday.com, and Abuzz. The new division had a decentralized structure and different organizational structures but still with similar roles as a common newspaper. The different websites were combined in the new organization to be able to learn from each other. A lot of effort was then put into creating a culture of team-work and openness, and the NYTD moved into a new building. This separated unit, first organizationally and then physically, led to tensions between the original Company and the new division. The new culture and employees hired from outside the Company created a very competitive internal environment. In 2001 the company owned several broadcast media properties, and the New York Times brand was believed to be the company’s most valuable asset, built through years of topnotch reporting and analysis, plus marketing and promotion. By September of 2001, NYTD had developed and was operating two websites: NYTimes.com and Boston.com. The websites included Internet access to the...
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...partner can also be a very negative experience. Shared decisions and shared profits and disagreements can lead to hard feelings amongst the partners. Partnerships that involve friends or family are a risk too. Friendships can be lost with hard feelings with long lasting effects that can cause families to split. Forming a partnership someone who does not share the same work ethic and financial discipline as the other will make it very difficult to succeed in business. Discuss funding options for small businesses. One of the most challenging experiences of starting a business is finding a d securing the financing. Ideally you want to have as much cash capitol as possible before starting the business. Borrowing the startup and initial operating funds can be a difficult task....
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