Financing Options: Exercises

Exercises

(AACSB) Analysis
The most important number in most financial plans is projected revenue. Why? For one thing, without a realistic estimate of your revenue, you can't accurately calculate your costs. Say, for example, that you just bought a condominium in Hawaii, which you plan to rent out to vacationers. Because you live in snowy New England, however, you plan to use it yourself from December 15 to January 15. You've also promised your sister that she can have it for the month of July. Now, in Hawaii, condo rents peak during the winter and summer seasons - December 15 to April 15, and June 15 to August 31. They also vary from island to island, according to age and quality, number of rooms, and location (on the beach or away from it). The good news is that your relatively new two-bedroom condo is on a glistening beach in Maui. The bad news is that no one is fortunate enough to keep a condo rented for the entire time that it's available. What information would you need to estimate your rental revenues for the year?
(AACSB) Analysis
You're developing a financial plan for a retail business that you want to launch this summer. You've determined that you need $500,000, including $50,000 for a truck, $80,000 for furniture and equipment, and $100,000 for inventory. You'll use the rest to cover start-up and operating costs during your first six months of operation. After considering the possible sources of funds available to you, create a table that shows how you'll obtain the $500,000 you need. It should include all the following items:
- Sources of all funds
- Dollar amounts to be obtained through each source
- The maturity, annual interest rate, and security of any loan
  The total of your sources must equal $500,000. Finally, write a brief report explaining the factors that you considered in arriving at your combination of sources.
(AACSB) Communication
For the past three years, you've operated a company that manufactures and sells customized surfboards. Sales are great, your employees work hard, and your customers are happy. In lots of ways, things couldn't be better. There is, however, one stubborn cloud hanging over this otherwise sunny picture: you're constantly short of cash. You've ruled out going to the bank because you'd probably be turned down, and you're not big enough to go public. Perhaps the solution is private investors. To see whether this option makes sense, research the pros and cons of getting funding from a venture capitalist. Write a brief report explaining why you have, or haven't, decided to seek private funding.