Question

Sources and Use of funds: Assuming, that you are planning to start-up your Grapefruit Juice company, you have personal savings of $30,000 and collect $40,000 from friends and relatives who would like to either have their seed money returned by the end of this calendar year at no interest or by the end of the second year of operation with 5% interest. If you borrow 50,000 from Bank of America, and $50,000 from Capital One Bank. 1) Outline the funds you have currently and the ones you intend to raise for the first six months of your business operations. Explain how do you plan to use the funds (a clear plan on how you will use the money) 2) Plan assumptions: The Financial plan must be based on decisions and facts. Investors want to know if this plan is realistic Outline your plan assumptions. 3) Also, assume that the company’s break-even point for the first- year operation is $80,000. Is where you make enough money in revenue to pay your expenses but you do not make money nor do you lose money.

Answer 1

Given:

Sources and Use of funds: Assuming, that you are planning to start-up your Grapefruit Juice company, you have personal savings of $30,000 and collect $40,000 from friends and relatives who would like to either have their seed money returned by the end of this calendar year at no interest or by the end of the second year of operation with 5% interest. If you borrow 50,000 from Bank of America, and $50,000 from Capital One Bank.

1. Outline the funds you have currently and the ones you intend to raise for the first six months of your business operations. Explain how you plan to use the funds (a clear plan on how you will use the money)

Outlining the funds I have currently hold

Investor Particular	Investment Type	Expected Interest Rate	$-USD
Myself			30000
Friends and Relatives	Investor	Total seed money + 5%	40000
Bank of America	Loan	Market rate of interest	50000
Capital One Bank	Loan	Market rate of interest	50000
		Total Amount	170000

Explanation how plan to spend the amount for 1^st 6 months of the business:

Start-Up Funding
Start-Up Expenses to Fund	61407
Start-up Assets to Fund	108593
Total	170000
Assets
Non-Cash Assets from Start-up	95665
Cash requirement from start-up	12928
Additional cash raised	0
Cash balance on starting date	12928
Total assets	108593
Liabilities
Current borrowing	0
Long term liabilities	38783
Account payable	0
Other Current liabilities	0
	38783
Capital	0
Planned Investment	0
Myself	46540
Friends & Relatives	46540
Banks	38137
Additional investment requirement	0
	131217
Loss at start-up	61407
Total capital	69810
Total Capital and Liabilities	108593
Total Funding	170000

Herein I am planning 170000 make expenses on assets worth 100000 for which the liability would be 20000. Further during the start-up may cost $50000.

2. Plan assumptions: The Financial plan must be based on decisions and facts. Investors want to know if this plan is realistic Outline your plan assumptions.

Start-up
Start-up Expenses	[A}
Legal	1551
Production Inventory	7757
Packing Materials	1939
Production Equipment	25856
Insurance	1939
Rent	2586
Promotion	2327
Other Expensed Equipment	6464
Business Sign	3878
Permits	1939
Office Supplies	1293
Other	3878
Total Start-up Expenses	61407
Start-up Assets	[B]
Cash Required	12928
Start-up Inventory	19392
Other Current Assets	11635
Long-term Assets	64639
Total Assets	108593
Total Requirements [A+B]	170000

3. Also, assume that the company’s break-even point for the first- year operation is $80,000. Is where you make enough money in revenue to pay your expenses but you do not make money nor do you lose money.

Overhead Expenses
Principal Debt payment [Seed money repayment]	40000
Owners Draw	5000
Production Inventory	7757
Packing Materials	1939
Insurance	1939
Rent	2586
Promotion	2327
Payroll	12928
Office Supplies	1293
Taxes	3878
Total Start-up Expenses	79646

Here total Profit = 80000 – 79646 = $354 [here you make enough money in revenue to pay your expenses but you do not make money nor do you lose money]