...FI 512 Week 1 Answer Key Chapter 1 1. [Financing Concepts] The following ventures are at different stages in their life cycles. Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing. A. Phil Young, founder of Pedal Pushers, has an idea for a pedal replacement for children’s bicycles. The Pedal Pusher will replace existing bicycle pedals with an easy release stirrup to help smaller children hold their feet on the pedals. The Pedal Pusher will also glow in the dark and will provide a musical sound as the bicycle is pedaled. Phil is seeking some financial help in developing working prototypes. Since the venture is still in the idea stage and searching for prototype capital, the venture would be classified in the development stage. While in this stage, the venture will be making efforts to obtain seed financing, which typically comes from the entrepreneur’s assets or from family and friends. B. Petal Providers is a firm that is trying to model the U.S. floral industry after its European counterparts. European flower markets tend to have larger selections at lower prices. Revenues started at $1 million last year when the first “mega” Petal Providers floral outlet was opened. Revenues are expected to be $3 million this year and $15 million next year after two additional stores are opened. Since the venture has already established...
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...Chapter 2 Mini Case: LearnRite.com Corporation A. Project industry sales for children’s software through 2013. Industry Sales: Children’s Software only Gross Profit Margin: 30% per year Y | Sales (in millions) | 2009 | 1,000 | 2010 | 1,000(.30)+1,000=1,300 | 2011 | 1,300(.30)+1,300=1,690 | 2012 | 1,690(.30)+1,690=2,197 | 2013 | 2,197(.30)+2,197=2,856.10 | B. Calculate the year-to-year annual sales growth rates for LearnRite and estimate the compound growth rate over the 2009-2013 periods. Y | Annual Sales (in millions) | Annual Growth Rate | | 2009 | 1.00 | - | | 2010 | 9.60 | (9.60-1.00)/1.00=860.00% | | 2011 | 30.10 | (30.10-9.60)/9.60=213.54% | | 2012 | 67.80 | (67.80-30.10)/30.10=125.25% | | 2013 | 121.40 | (121.40-67.80)/67.80=79.06% | | Compound Growth Rate (2009-2013): [(121.40-1.00)^(1/4)]-1=2.31936=231.94% | C. Estimate LearnRite’s expected market share in each year based on the given data. Y | Expected Market Share | 2009 | 1.00/1,000.00=0.10% | 2010 | 9.60/1,300=0.74% | 2011 | 30.10/1,690=1.78% | 2012 | 67.80/2,197=3.09% | 2013 | 121.40/2,856.10=4.25% | D. Estimate the firm’s net income (loss) in each of the five years. Y | Net Income (in millions) | Gross Proft Based on GPM (in millions) | Operating Expenses (in millions) | Net Profit Margin | 2009 | -2.70 | 1.00(.30)=0.30 | 3.00 | - | 2010 | -2.12 | 9.60(.30)=2.88 | 5.00 | - | 2011 | 3.01 | 30.10(.30)=9.03 | - | 10% | 2012 | 6.78 | 67...
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