Suppose you are the owner of a small woodworking business that is privately incorporated. You currently...
Suppose you are the owner of a small woodworking business that is privately incorporated. You currently own 100% of the business (equity valued at $100,000), with no long term debt. You are looking to purchase a new piece of equipment costing $10,000 that will require funds that you do not have available. How would you choose to finance the equipment? Explain the reasoning behind your decision.
Homework Answers
To fund the new equipment costing $ 10,000, it is advisable to choose debt. This is because since the owner is holding 100%, any process of raising equity would dilute the ownership. Also, the cost of raising equity is higher than that of debt.
Therefore, it is advised to raise debt to fund the purchase.
Add Answer to:
Suppose you are the owner of a small woodworking business that
is privately incorporated. You currently...
Suppose you are the owner of a small woodworking business that is privately incorporated. Your currently...
Suppose you are the owner of a small woodworking business that is privately incorporated. Your currently own 100% of the business (equity valued at $100,000), with no long term debt. You are looking to purchase a new piece of equipment costing $10,000 that will require funds that you do not have available. How would you choose to finance the equipment? Explain the reasoning behind your decision.
Question #7 You are the owner of a small business. An opportunity to expand into a...
Question #7 You are the owner of a small business. An opportunity to expand into a new market niche arose. It requires an initial equipment investment of $300,000. You will finance the entire amount with a 5-year loan at 3.2% interest rate (annual payments). Depreciation will follow MACRS-3 Sales projections look very promising as shown below: • $200,000 in first year's projected sales • Sales growth is expected to increase by 40% over the previous year's sales with a high...
Sample Scenario: You are a small business owner who is seeking to grow your business's revenue....
Sample Scenario: You are a small business owner who is seeking to grow your business's revenue. You own a bakery, called The Barkery, specializing in making homemade and nutritious dog treats. You make the treats yourself, you manage the small brick-and-mortar shop when it's open, and with what time is left, you go into the community to increase brand awareness. Currently you are considering hiring a part-time salesperson who will focus on a reseller channel (indirect sales channel): Business-to-consumer (direct...
Example Suppose you are a small business and you currently rent 1200 sq ft. of office...
Example Suppose you are a small business and you currently rent 1200 sq ft. of office space at $22.50 a sq ft per year. In this cost, office cleaning is included. You are now looking at moving to a bigger office space of 2500 sq ft, and the utilities of water and electric are included in addition to the office cleaning. Three years ago when you signed the lease, the inflation rate was 105. The current inflation rate is 120....
Question #7 You are the owner of a small business. An opportunity to expand into a...
Question #7 You are the owner of a small business. An opportunity to expand into a new market niche arose. It requires an initial equipment investment of $300,000. You will finance the entire amount with a 5-year loan at 3.2% interest rate (annual payments). Depreciation will follow MACRS-3 Sales projections look very promising as shown below: • $200,000 in first year's projected sales • Sales growth is expected to increase by 40% over the previous year's sales with a high...
A real-estate investor has the opportunity to purchase a small apartment complex. The apartment complex costs $4...
A real-estate investor has the opportunity to purchase a small apartment complex. The apartment complex costs $4 million and is expected to generate net revenue (net after all operating and finance costs) of $60,000 per month. Of course, the revenue could vary because the occupancy rate is uncertain. Considering the uncertainty, the revenue could vary from a low of -$10,000 to a high of $100,000 per month. Assume that the investor’s objective is to maximize the value of the investment at the end of...
business finance practice questions You are financial managers of a company which makes printers. Currently you...
business finance practice questions
You are financial managers of a company which makes printers. Currently you are using NPV method to evaluate a 10- year project that produces a new model. The WACC is 10% and the tax rate is 21%. (2 points) 1. The project needs a set of machine that is worth $5 million. The company uses 10-year straight-line depreciation, 2. In the past two years, the company spent $800,000 in R&D in developing the new model. 3....
You currently own and operate a bar in Champaign called the Illini Tap (the bar from...
You currently own and operate a bar in Champaign called the Illini Tap (the bar from the financial statement section of the course). Up until now you have only served beer and hard alcohol to your customers (no food), and all liquor served has been purchased through a distributor. Business has been good, but you have just bought and moved into a new building and are looking to further expand the bar’s business. The new building you are now located...
3. Find the IRR of each investment. You currently own and operate a bar...
3. Find
the IRR of each investment.
You currently own and operate a bar in Chicago called the Big Tap. Up until now you have only served beer and hard alcohol to your customers (no food), and all liquor served has been purchased through a distributor. Business has been good, but you have just bought and moved into a new building and are looking to further expand the bar's business. The new building you are now located in has more...
4. Find the MIRR of each investment using the WACC as the discount rate. You currently...
4. Find
the MIRR of each investment using the WACC as the discount
rate.
You currently own and operate a bar in Chicago called the Big Tap. Up until now you have only served beer and hard alcohol to your customers (no food), and all liquor served has been purchased through a distributor. Business has been good, but you have just bought and moved into a new building and are looking to further expand the bar's business. The new building...
Question #7 You are the owner of a small business. An opportunity to expand into a new market niche arose. It requires an initial equipment investment of $300,000. You will finance the entire amount with a 5-year loan at 3.2% interest rate (annual payments). Depreciation will follow MACRS-3 Sales projections look very promising as shown below: • $200,000 in first year's projected sales • Sales growth is expected to increase by 40% over the previous year's sales with a high...
Sample Scenario: You are a small business owner who is seeking to grow your business's revenue. You own a bakery, called The Barkery, specializing in making homemade and nutritious dog treats. You make the treats yourself, you manage the small brick-and-mortar shop when it's open, and with what time is left, you go into the community to increase brand awareness. Currently you are considering hiring a part-time salesperson who will focus on a reseller channel (indirect sales channel): Business-to-consumer (direct...
Example Suppose you are a small business and you currently rent 1200 sq ft. of office space at $22.50 a sq ft per year. In this cost, office cleaning is included. You are now looking at moving to a bigger office space of 2500 sq ft, and the utilities of water and electric are included in addition to the office cleaning. Three years ago when you signed the lease, the inflation rate was 105. The current inflation rate is 120....
Question #7 You are the owner of a small business. An opportunity to expand into a new market niche arose. It requires an initial equipment investment of $300,000. You will finance the entire amount with a 5-year loan at 3.2% interest rate (annual payments). Depreciation will follow MACRS-3 Sales projections look very promising as shown below: • $200,000 in first year's projected sales • Sales growth is expected to increase by 40% over the previous year's sales with a high...
business finance practice questions
You are financial managers of a company which makes printers. Currently you are using NPV method to evaluate a 10- year project that produces a new model. The WACC is 10% and the tax rate is 21%. (2 points) 1. The project needs a set of machine that is worth $5 million. The company uses 10-year straight-line depreciation, 2. In the past two years, the company spent $800,000 in R&D in developing the new model. 3....
3. Find
the IRR of each investment.
You currently own and operate a bar in Chicago called the Big Tap. Up until now you have only served beer and hard alcohol to your customers (no food), and all liquor served has been purchased through a distributor. Business has been good, but you have just bought and moved into a new building and are looking to further expand the bar's business. The new building you are now located in has more...
4. Find
the MIRR of each investment using the WACC as the discount
rate.
You currently own and operate a bar in Chicago called the Big Tap. Up until now you have only served beer and hard alcohol to your customers (no food), and all liquor served has been purchased through a distributor. Business has been good, but you have just bought and moved into a new building and are looking to further expand the bar's business. The new building...
Most questions answered within 3 hours.
-
In Drosophila, the transition from the syncytial blastoderm
stage to the cellular blastoderm stage is a...
asked 9 minutes ago -
Project management question:
Name 3 different types of resources (hint: humans are one
type)
asked 22 minutes ago -
Consider the following reaction: C 2H 2( g) + 2H 2( g) C 2H 6(
g)...
asked 30 minutes ago -
Consider a 1.0 L buffer containing 0.092 mol L-1 HCOOH and 0.100
mol L-1 HCOO-. What...
asked 39 minutes ago -
Koch Realty has owned a vacant land with a FMV of
$775,000 and an adjusted basis...
asked 44 minutes ago -
It is estimated 29% of all adults in United States invest in
stocks and that 85%...
asked 44 minutes ago -
What does a 2-sided p value of 0.04 mean? (I am not asking if it
is...
asked 58 minutes ago -
A parallel-plate capacitor is made from two aluminum-foil
sheets, each 7.8 cmcm wide and 5.1 mmlong....
asked 59 minutes ago -
1. why is toluene a stronger nucleophile than benzene?
2.why is phenol a stronger nucleophile than...
asked 1 hour ago -
4. How can you solve for the density of the liquid from the
slope? Please show...
asked 1 hour ago -
when 2053 j of heat is added to 46.3 g of hexane C6H14 the
temperature increases...
asked 1 hour ago -
I need new and unique answers, please. (Use your own words,
don't copy and paste), Please...
asked 1 hour ago