Tinkerball hotdogs & Ice-cream Essay Example for Free

Tinkerball alive(p)dogs Ice-cream EssayThe purpose of this paper is to carry through a case study analysis and provide a solution to the review questions pertaining to different aspects of bump military rating and, thereby, concluding with recommendations.Mr. terry cloth Bell is planning to sell ice-cream and hotdogs by acquiring Mr. Jonathan van and opposite equipment from Mr. Luigi. Mr. Jonathan wishes to sell take out his van and has asked Mr. terrys services to sell it off. There is a resale harm for this van. Mr. Luigi had been in the equal business of mobile vending van for almost 10 years and had an separatrix recently.He wishes to sell off his equipment and supplies at a price to Mr. Terry. Mr. Luigi was selling ice-cream under a liberty agreement with a company Mr. whippy which give be no longer applicable later completion of 10 years and Mr. Terry shall not be entitled to terms under this certify agreement. Mr. Terry has been provided with financial data by Mr. Luigi for last 10 years and has been able to draw the interchange flows from the operating activities of the business. We will now look at the review questions and provide answers for themIf it is sour that no c atomic heel 53s argon wasted the modal(a) price per icecream is $8.33Term12345678910Icecream Sales55,66037,66049,88054,35057,56044,35056,43057,99055,32058,010Cones2,7831,8832,4942,7182,8782,2182,8222,9002,7662,901Icecream3,3402,2602,9933,2613,4542,6613,3863,4793,3193,481 dealership Fees557377499544576444564580553580 essence Payments6,6804,5205,9866,5236,9085,3236,7726,9596,6386,962Price Sales/Payments8.338.338.338.338.338.338.338.338.338.33Figures atomic number 18 stated in U.S. Dollars terms knock back 1 Average Selling Price of IcecreamAs we lowlife see from hedge 2, the sales of icecream argon more revenue generating and the return on investment / damage is higher comp atomic number 18d to the sales of hotdogs, whence, icecream is more profitable.Term1234 5678910IcecreamSales55,660376604988054350575604435056430579905532058010Total Payments6,6804,5205,9866,5236,9085,3236,7726,9596,6386,962 clams funds operate48,98033,14043,89447,82750,65239,02749,65851,03148,68251,048ROI %733.23733.19733.28733.21733.24733.18733.28733.31733.38733.24 ardent dogsSales21,21033,32023,24022,21019,99024,38020,89021,99021,21024,300Total Payments4,7727,4975,2294,9974,4985,4864,7004,9484,7725,468Net Cash Flow16,43825,82318,01117,21315,49218,89416,19017,04216,43818,832ROI %344.47344.44344.44344.47344.42344.40344.47344.42344.47344.40Figures are stated in U.S. Dollars termsTable 2 Products ProfitabilityFrom table 3, it is apparent that the sales of hotdogs are riskier. The rationing is base on the wampum interchange flow from two harvest-feasts. The net property flow from sales of ice cream are more consistent in terms of increasing trend, however, that from sales of hotdogs has a variant trend and is therefore assumeed to be riskier.Term12345678910Icecrea mNet Cash Flow48,98033,14043,89447,82750,65239,02749,65851,03148,68251,048Change%(32.34)32.458.965.91(22.95)27.242.76(4.60)4.86Hot dogsNet Cash Flow16,43825,82318,01117,21315,49218,89416,19017,04216,43818,832Change%57.09(30.25)(4.43)(10.00)21.96(14.31)5.26(3.54)14.56Figures are stated in U.S. Dollars terms. disallow figures are in bold parenthesis.Table 3 Risk Evaluation DiversificationDiversification is a risk management technique. From table 3 supra we can conclude that by diversifying into two products it allowed Mr. Luigi to cater different customers. By doing this it is too noted that if one is product does not perform well in a year then the other product which may be doing comparatively well can reduce the negative impact on the cash flows.For projecting the be 3 weekends estimates (A) we assume that a constant average return in figures based on 47 working weekends. This is performed by apportioning 47 working weekends result to total 50 working weekends. Another pruden t approach can be adopted (B) where the YoY% change is adjusted for remaining 3 weekends. It is also assumed that franchise fees and license fees are paid at the start of the financial year and will remain the same.Year / Item910(47 weekends)Actual Figures x 50/47 (A)Growth Rate x 50/47 (B)Icecream sales55,32058,01061,71358,182Hotdog Sales21,21024,30025,85124,497Total Sales76,53082,31087,56482,679Cones2,7662,9013,0862,910Icecream3,3193,4813,7033,491Buns2,6513,0383,2323,063Hotdogs2,1212,4302,5852,450Vehicle-related payments2,8802,6602,8302,646Franchise fees553580580580 demonstrate feescl150150150Total payments14,44115,23916,16615,289Net cash flow62,08967,07171,39867,390Figures are stated in U.S. Dollars termsTable 4 Estimates for remaining 3 working weekendsFor calculating the average annual rates for both products we assume figures from Table 4 break B as the cash flow for the last year. Average Annual Growth Rate (AAGR) is the average increase in the economic value of an individua l investment or portfolio over the period of a year (Investopedia n.d.). Average annual rate is calculated by taking the arithmetic mean for 2 years. We also assume that cash flows are generated at the end of the financial year. In the first year it is assumed to have vitamin C% growth. All other aspects of investment and setting up business expenses are ignored for the first year.Term12345678910 Given10NewIcecreamNet Cash Flow48,98033,14043,89447,82750,65239,02749,65851,03148,68251,04851,201Change%100(32.34)32.458.965.91(22.95)27.242.76(4.60)4.865.17AAGR %33.830.0620.717.43(8.52)2.1415.00(0.92)0.130.29Hot DogsNet Cash Flow16,43825,82318,01117,21315,49218,89416,19017,04216,43818,83224,497Change%10057.09(30.25)(4.43)(10.00)21.96(14.31)5.26(3.54)14.5615.49AAGR %78.5513.42(17.34)(7.21)5.983.82(4.52)0.865.515.97Figures are stated in U.S. Dollars terms. Negative figures are in bold parenthesis.Table 5 Average Annual Growth RatesAssumptionsTerry pays Mr. Jonathan the resale value of the van as prescribed by Mr. Joe.Terry pays for repairing of the van to Mr. Joe.Terry pays for van equipment and supplies to Mr. Luigi.Franchise agreement with Mr. Whippy is cancelled.Goodwill from Mr. Luigi business is ignored.Taxes are ignored.License fee is applicable at the same rate for next 10 years.There will be no new competition.There will be no new food regulations.There is no wastage.The demand for ice cream and hot dogs will be stable or growing at steady pace.Sickness or weekends off are ignored.An allowance of Mr. Terry time of 860 hours per year costing at $40 will be considered as cash outflow.Vehicle related expenses are considered to be $2,601, a constant figure, when indicated to be declining in previous years. However, they are extrapolated in the years when increasing based on respective years growth rate in these expenses. In the year 4th, 6th and 8th, they are assumed to increase by 22%, 12% and 9% respectively.The figures from Table 4 Col B are considered as bas e figures.The number of working weekends remains the same i.e. 50.The AAGR for both products are used for estimating forthcoming projections.Year / Item012345678910PurchaseVan(2,000)Equipment(1,200)Supplies(50)RepairingVan(2,500)Icecream sales77,86577,90894,039101,02992,41994,401108,564107,566107,704108,017Hotdog Sales43,73949,60941,00638,04840,32341,86539,97140,31542,53645,075Total Sales121,604127,517135,045139,077132,743136,267148,535147,881150,240153,092Cones3,8943,8964,7035,0524,6224,7215,4295,3795,3865,402Icecream4,6724,6755,6436,0625,5465,6656,5156,4556,4636,482Buns5,4686,2025,1274,7575,0415,2344,9975,0405,3185,635Hotdogs4,3744,9614,1013,8054,0324,1873,9974,0314,2544,508Vehicle-related payments2,6012,6012,6013,1652,6012,9132,6012,8352,6012,601License fees150150150150150150150150150150Allowance34,40034,40034,40034,40034,40034,40034,40034,40034,40034,400Total payments55,56056,88556,72457,39156,39257,27058,08958,29158,57259,178Net cash flow(5,750)66,04470,63178,32081,68576,35078 ,99790,44689,59091,66893,914Figures are stated in U.S. Dollars termsTable 6 Average Annual Growth RatesNet present value is the total value of cash flows from a project discounted at a suitable interest rate. This is a measurement diaphysis used for predicting whether a project will be successful or not.TimeNet Cash flowDiscount FactorPresent ValueNet Present Value0(5,750)(5,750)166,0440.95238162,898.71270,6310.82270258,108.64378,3200.74621558,443.92481,6850.67683955,287.79576,3500.61391346,872.49678,9970.55683743,988.60790,4460.50506845,681.23889,5900.45811241,042.16991,6680.41552138,090.121093,9140.37688935,395.34480,059Figures are stated in U.S. Dollars termsTable 7 Net Present ValueConclusionThe NPV of future cash flow projections is positive which implies that the project may be accepted. They are other factors which Mr. Terry should consider before undertaking this business. Mr. Luigi has been in the business for almost 10 years. There is not much regarding his prior(prenomi nal) business history but he has done well in icecream and hotdogs selling business as well. Expectation to produce the same result by a teacher is somewhat subjective. Mr. Terry is a retired teacher ad has no prior experience of this business and it is assumed that he is in steady-going health which would surely be an important factor for such business.We have assumed that despite of cancellation of Mr. Whippy franchise, Mr. Terry would be able to create good business for icecream and he would be able to barter for his supplies from a reliable source offering competitive prices. Other assumptions make for the above project evaluation can change hence altering the outcome of the project. Additional item which could be added to the above cash flow projections is tax liability and any financing activity which Mr. Terry may require to finance his initial investments. We have also ignored the goodwill of business which Mr. Luigi has developed over the years. In accounting terms, a va lue for goodwill is an asset for business and should therefore be paid for to Mr. Luigi as commented by Mrs. Anita. This will be considered as part of initial investment. However, some may argue that Mr. Terry is not using the same name for his business and assumingly will not using Mr. Luigi goodwill for promoting his own business. It is however, probably for Mr. Terry to enter this business with small investment and try to serve his customers with the same enthusiasm and carriage as Mr. Luigi did for last 10 years. A more accurate projection can be made with further detailed information regarding the market and other issues. Finally, these projections will be adjusted once Mr. Terry actually enters this business.List of ReferencesInvestopedia- A Forbes Digital Company (n. d.) Average Annual Growth Rate (AAGR). online visible(prenominal) from www.investopedia.com/terms/a/aagr.asp 30 July 2008 Tinkerbell hotdogs icecreams Case Study. Financial Analysis Decision Making