Finance Assignment 3: More of the Basics and Beyond

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 page paper in which you:

Prepare a pro forma balance sheet for the first twelve 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 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 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 years old and running profitably. You are now ready to look outward five 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 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 page paper in which you:

Use one 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.