Fluent Essays

APA Written Assignment This weeks written assignment will be a continuation of  your prior research assignments, so it should include your fork from prior weeks with any edits based on feedback.  This week you will build onto it.  1.  Choose a business you would like to form. 2.  What is the business and in what industry?  What is your NAICS code? 3.  What legal structure of business will you choose and why? 4.  Research your industry and find common ratios significant to your industry.  What are they and what are they telling you about your industry?  Be specific as to the ratios relevant to your industry and what are the industry averages for those ratios. This will require significant research on your part, so please start on this early. 5.  Review the common-size financial statements of at least two businesses within your industry.  Provide copies of balance sheets and income statements of each of these businesses and discuss the information you can derive from those financial statements and how you can apply that to your business.   The review of the financial statements should be specific to those statements provided, and not a generalized discussion of what financial statements are. 6.  Research your industry and provide an industry analysis which should discuss relevant trends.  You should thoroughly research your industry and provide relevant data.  I will anticipate that you will use multiple sources and provide appropriate in-text citations. BUSINESS STUDIES 2 BUSINESS STUDIES 2 Roberta Amaral Henriques Week 1 522 – Managerial Finance Jul 18, 2021 Southern States University Dr. Gus Del Rivero The business of choice is the motor vehicle and parts dealer business that deals with the supply and the sales of the vehicles as well as the spare parts of the various vehicles. It however majors in the importation and the sales of the vehicles both locally and internationally. It means that the business has to do with vehicles and hence is in the vehicle sales industry. The NAICS code of the business is 441 (Chandler & Bunn, 2019). The business mentioned above would entail the importation of both the new and used cars which can now be sold to other people. It essentially refers top both the zero and non-zero mileages vehicles that are to be availed in the various centers of business of the company. When talking about the spare parts, they are to be sourced from various countries across the world. Both the cheap and costly spare parts would be availed with various types of spare parts availed to diversify the pool of choice for the buyers (Chandler & Bunn, 2019). Vehicles that are to be imported would be of different types. The company would not concentrate on a particular brand of vehicle, but instead would avail a variety to be able to satisfy the diverse needs of the various businesses (Bochnacka, 2018). Regarding the legal structure that the business would adopt, the business of choice above would prefer to use the limited liability company. It is because it provides the opportunity for the business to act like a corporation and hence the members would be provided with limited liability to any liability that they could face in future operations. Unlike partnerships, the limited liability would shield the business against incurring any liabilities that could potentially harm the business. Among other benefits that are to be accrued from the legal structure (Bochnacka, 2018). References Bochnacka, D. (2018). Developing process models of complex business structures. Zeszyty Naukowe. Organizacja i Zarządzanie/Politechnika Śląska. Chandler, M. D., & Bunn, T. L. (2019). Motor vehicle towing: an analysis of injuries in a high-risk yet understudied industry. Journal of safety research, 71, 191-200. 4 Automobile Service Station Roberta Amaral Henriques Week 2 522 – Managerial Finance Jul 23, 2021 Southern States University Dr. Gus Del Rivero Automobile Service Station            Considering that car dealing incorporates a wide range of activities involving maintenance, repair and to a more significant extent, the sale of motor vehicles, a service station, will guarantee a suitable solution to most motor vehicle requirements. The business is thus targeted to provide vast services to consumers, ranging from intricate functions such as car tracker installation to lenient functions such as car cleaning, as mentioned in the previous context. This, therefore, aims to satisfy the increasing demand for motor vehicle services, up to and including possession that is not overrated.            The service station based on the automobile industry is expressly set to apply the level NAICS codes, Sector: 45 in retail trade, within Subsector: 441 involving vehicle parts dealing and motor vehicle sale to a more considerable extent (Hui et al., 2016). On a broader scope, the Company will focus majorly on several automobile SIC and NAIC codes, applying them simultaneously following the requirements of the field. Ideally, such include the likes of automobile dealing-441110 NAICS code for both new and used vehicles. Similarly, 811121 NAICS codes for antique and classic automobiles, focusing on the interior design and body paint.            A stout business structure is technically the backbone of every successful business (Hui et al., 2016). Therefore, the service station Company is set to incorporate a partnership proprietorship, with adequate consideration for smooth operation and management. The Company ideally seeks to establish a well-defined partnership deed, with clearly stipulated terms of the agreement. Therefore, the partners will be obliged to hire qualified human resources and ensure all legal requirements are met and adhered to; this is to maintain efficiency and avoid any legal discrepancies from arising.            Many different analysts have identified several significant ratios in the auto industry, including the debt-to Equity ratio (D/E) at an average of 2.5 debt or leverage and the return on equity ratio (ROE) between 10-11\%, all of which fall under the financing of the Company (Morales & Zamora, 2018). According to statistics, the auto industry in manufacturing, maintenance, and spare parts sales has provided approximately 11 million cars in the US in only one year. This explains the massive expenditure in research and developments carried out on the industry, stipulated to approximately $100 billion, further indicating the significance of the industry to people across the globe. References Hui, K. W., Nelson, K. K., & Yeung, P. E. (2016). On the persistence and pricing of industry-wide and firm-specific earnings, cash flows, and accruals. Journal of Accounting and Economics, 61(1), 185-202. Morales-Díaz, J., & Zamora-Ramírez, C. (2018). The impact of IFRS 16 on key financial ratios: A new methodological approach. Accounting in Europe, 15(1), 105-133. ECONOMICS 1 ECONOMICS 6 Roberta Amaral Henriques Week 3 522 – Managerial Finance Jul 31, 2021 Southern States University Dr. Gus Del Rivero Written Problem 1:  a) At the start of 2016, the value of anticipated cash flow savings was 820036. b) The firm should not pursue this project based purely on the one condition specified by management because the firm requires present cash flow savings of at least $860,000, but the savings is only $820036. c) The chance of a decrease in value owing to interest rate swings is known as interest rate risk. When the interest rate rises, there is a greater chance that the present value of cash flow savings will decrease. The present value of monetary savings will decrease in that circumstance. We advise against moving further with the proposal. As a result, even if interest rates rise, our advice remains the same because the PV of cash savings will be less than 860000. Written Problem 2: a) Yield to maturity; when a bond is held to maturity, the The rate at which the PV of cash inflows equals the Bond price is known as the yield to maturity (YTM). A bonds yield to maturity (YTM) is the predicted total return if it is held to maturity. Yield to maturity is the name given to long-term bond yields, but they are expressed as an annual rate. Period Cash FlowPVF/PVAF @ 3.5 \% PV of Cash FlowsPVF/ PVAF @4 \% PV of Cash Flows 1-30 $                 30.00 18.3920 $               551.76 17.2920$                   518.76 30 $           1,000.00 0.3563 $               356.28 0.3083 $                   308.32 PV of Cash Inflows $               908.04 $                   827.08 PV of Cash Oiutflows $               874.42 $                   874.42 NPV $                  33.62 $                    -47.34 YTM per six months = Rate at which least +ve NPV + [ NPV at that rate / Change in NPV due to Inc of 0.5\% in Int Rate ] * 0.5\% = 3.5 \% + [33.62 / 80.96 ] * 0.5\% = 3.5 \% + [0.42 * 0.5\% ] = 3.5 \% + [0.2076 \% ] = 3.71 \% YTM Per anum = IRR per six months * 12 / 6 = 3.7076 \% * 2 = 7.4153 \% i.e 7.42 \% PVAF = Sum [ PVF(r percent, n) ] PVF(r percent, n) PVF(r percent, n) PVF(r percent, PVF(r percent, n) = 1 / ( 1 + r )n r r r r r r r r r r r r r r r r r r n - Number of Periods - Int Rate per Period How do I use Excel to calculate PVAF? +PV(Rate,NPER,-1) Disc rate = rate NPER stands for number of periods. b) The total present value of all expected coupon payments plus the total present value of the par value at maturity is referred to as the bond price. Bond price and YTM ( Discount rate ) have an inverse relationship, but Cash flow ( Coupon/ maturity Value ) and bond price have a direct relationship. PV of CFs from a Bond = Bond Price. Period Cash Flow PVF/ PVAF @4.71 \%Disc CF 1 - 30 $      30.00                         15.8940 $    476.82 30 $ 1,000.00                           0.2514 $    251.39 Bond Price $    728.21 PVAF is used because Coupon Payments are made at regular periods. The Maturity Value is based on a single payment. As a result, PVF is used. Annual Coupon Amount / Number of times coupon paid in a year Equals Periodic Cash Flow Disc Rate Used = Annual Disc Rate / Number of Coupons Paid in a Year What is the difference between PVAF and PVF? PVAF = Sum [ PVF(r percent, n) ] PVF(r percent, n) PVF(r percent, n) PVF(r percent, PVF = 1 / ( 1 + r + r + r + r + r + r + r + r + r Where r is the annual int rate Where n is the number of years. What is the best way to calculate PVAF in Excel? +PV(Rate,NPER,-1) Disc rate = rate Nper is the number of periods in a year. c) Period Cash Flow PVF/ PVAF @2.71 \%Disc CF 1 - 30 $      30.00                         20.3561 $    610.68 30 $ 1,000.00                           0.4484 $    448.35 Bond Price $ 1,059.03 As Coupon Payments are paid periodically with regular intervals, PVAF is used. Maturity Value is single payment. Hence PVF is used. Periodic Cash Flow = Annual Coupon Amount / No. times coupon paid in a year Disc Rate Used = Disc rate per anum / No. of time References Flynn, S. M. (2018). Economics. Sloman, J., Guest, J., & Garratt, D. (2018). Economics. Roberta Amaral Henriques Week 5 522 – Managerial Finance Aug 14, 2021 Southern States University Dr. Gus Del Rivero Finance Work Problem 1 a. Let Discount rate = 10\% NPV = [(600000/1+10\%) +((1000000/ (1+10\%) ^2) +((1000000/ (1+10\%) ^3) +((2000000/ (1+10\%) ^4) +((3000000/ (1+10\%) ^5) +((3500000/ (1+10\%) ^6) +((4000000/ (1+10\%) ^7) +((6000000/ (1+10\%) ^8) +((8000000/ (1+10\%) ^9) +((12000000/ (1+10\%) ^10)] – 15000000 =545454.5 + 826446.3 + 751314.8 + 1366026.9 + 1862764 + 1975658.8 +2052632.5 + 2799044.3+3392781 + 4626519.5 =20198642.6-15000000 =5198642.6 b. The project is acceptable under NPV technique since the NPV is positive c. IRR @ 10\% NPV = [(600000/1+10\%) +((1000000/ (1+10\%) ^2) +((1000000/ (1+10\%) ^3) +((2000000/ (1+10\%) ^4) +((3000000/ (1+10\%) ^5) +((3500000/ (1+10\%) ^6) +((4000000/ (1+10\%) ^7) +((6000000/ (1+10\%) ^8) +((8000000/ (1+10\%) ^9) +((12000000/ (1+10\%) ^10)] – 15000000 =545454.5 + 826446.3 + 751314.8 + 1366026.9 + 1862764 + 1975658.8 +2052632.5 + 2799044.3+3392781 + 4626519.5 =20198642.6-15000000 =5198642.6 IRR @ 15\% NPV = [(600000/1+15\%) +((1000000/ (1+15\%) ^2) +((1000000/ (1+15\%) ^3) +((2000000/ (1+15\%) ^4) +((3000000/ (1+15\%) ^5) +((3500000/ (1+15\%) ^6) +((4000000/ (1+15\%) ^7) +((6000000/ (1+15\%) ^8) +((8000000/ (1+15\%) ^9) +((12000000/ (1+15\%) ^10)] – 15000000 = [5217391 + 756144 + 657516 + 1143506 + 1491530 + 1513147 + 1503748 + 1961411 + 2274099 + 2966216] -15000000 = 19484708 -15000000 = 4484708 IRR= 15\% + [4484708/ (4484708-5198642.6)] (10\%-15\%) =15\%+31.4\% = 46.4\% d. Accept the project since the IRR (46.4\%) is greater than required rate of return of the project (10\%). e. Yes. Both NPV and IRR suggested that project should be accepted. f. Payback period = Initial investment/Cash inflows = 6 years+ (15000000-11100000)/4000000 = 6+0.975 =6.975years g. The project should be acceptable since the payback period of the project (6.975 years) is between 1 and 7 years. Problem 2 a. b. Depreciation c. d. Terminal cashflows Sheet1 Depreciation schedule for Proposed machine Cost of Machine 145000 Recovery period 5 MACR depreciation 200\% Salvage 24000 $24,023.99 Year Depreciation 1 $43,790.00 2 $30,565.42 3 $21,334.66 4 $14,891.59 5 $10,394.33 Depreciation schedule for Present machine Cost of Machine 120000 Recovery period 3 MACR depreciation 200\% Salvage 70000 $70,113.25 Year Depreciation 1 $19,680.00 2 $16,452.48 3 $13,754.27 Add: Depreciation4379030565.4221334.6614891.5910394.33 operating Cashinflows8051678226.1780533.8677956.6476157.73 Present machine Earning before Dpreciation,interest and taxes950009500095000 Depreciation1968016452.4813754.27 EBIT7532078547.5281245.73 Taxes @40\%3012831419.0132498.29 Net Profit after tax4519247128.5148747.44 Add: Depreciation1968016452.4813754.27 operating Cashinflows6487263580.9962501.71 Sheet1 Year 1 2 3 4 5 Proposed machine Earning before Dpreciation,interest and taxes 105000 110000 120000 120000 120000 Depreciation 43790 30565.42 21334.66 14891.59 10394.33 EBIT 61210 79434.58 98665.34 105108.41 109605.67 Taxes @40\% 24484 31773.832 39466.136 42043.364 43842.268 Net Profit after tax 36726 47660.748 59199.204 63065.046 65763.402 Add: Depreciation 43790 30565.42 21334.66 14891.59 10394.33 operating Cashinflows 80516 78226.168 80533.864 77956.636 76157.732 Present machine Earning before Dpreciation,interest and taxes 95000 95000 95000 Depreciation 19680 16452.48 13754.27 EBIT 75320 78547.52 81245.73 Taxes @40\% 30128 31419.008 32498.292 Net Profit after tax 45192 47128.512 48747.438 Add: Depreciation 19680 16452.48 13754.27 operating Cashinflows 64872 63580.992 62501.708 Proposed machine Sale of proposed machine24000 NBV @ end of Yr 524023.99 Net Gain-23.99 Tax on gain @40\%-9.596 Total proceeds after taxation-14.394 Present machine Sale of present machine70000 NBV @ end of Yr 370133.25 Net gain-133.25 Tax on gain-53.3 Total proceeds after taxation-79.95 Change in net Working capital50000 Terminal Cash flow49905.656 Sheet1 Proposed machine Sale of proposed machine 24000 NBV @ end of Yr 5 24023.99 Net Gain -23.99 Tax on gain @40\% -9.596 Total proceeds after taxation -14.394 Present machine Sale of present machine 70000 NBV @ end of Yr 3 70133.25 Net gain -133.25 Tax on gain -53.3 Total proceeds after taxation -79.95 Change in net Working capital 50000 Terminal Cash flow 49905.656 yearCash inflowsCumulative cashflows 1600000600000 210000001600000 310000002600000 420000004600000 530000007600000 6350000011100000 7400000015100000 8600000021100000 9800000029100000 Sheet1 year Cash inflows Cumulative cashflows 1 600000 600000 2 1000000 1600000 3 1000000 2600000 4 2000000 4600000 5 3000000 7600000 6 3500000 11100000 7 4000000 15100000 8 6000000 21100000 9 8000000 29100000 10 12000000 41100000 Damon corporation initial Investment Total cost of Installed machine160000 Add: cost of installation15000 Cost of proposed machine145000 Net income from sale of currrent machine Proceeds from the sale of current machine70000 Less: Tax on sale of machine @40\%-45.298688Change in working capital Net income from sale of currrent machine70045.29869Increase in Receivable15000 Increase in payables16000 change in working capital50000Increase in inventontory19000 Initial investment265045.2987net change in Working capital50000 Tax on sale of old machine Cost of machine120000 Depreciation (MACRS Yr1$19,680.00 Yr 2$16,452.48 Yr3$13,754.27 Book value$70,113.25 Sales price70,000.00$ Loss on sale$113.25 Tax on [email protected]\%-45.298688 Sheet1 Damon corporation initial Investment Total cost of Installed machine 160000 Add: cost of installation 15000 Cost of proposed machine 145000 Net income from sale of currrent machine Proceeds from the sale of current machine 70000 Less: Tax on sale of machine @40\% -45.298688 Change in working capital Net income from sale of currrent machine 70045.298688 Increase in Receivable 15000 Increase in payables 16000 change in working capital 50000 Increase in inventontory 19000 Initial investment 265045.298688 net change in Working capital 50000 Tax on sale of old machine Cost of machine 120000 Depreciation (MACRS Yr1 $19,680.00 Yr 2 $16,452.48 Yr3 $13,754.27 Book value $70,113.25 Sales price $ 70,000.00 Loss on sale $113.25 Tax on [email protected]\% -45.298688 Depreciation schedule for Proposed machine Cost of Machine145000 Recovery period5 MACR depreciation200\% Salvage24000$24,023.99 YearDepreciation 1$43,790.00 2$30,565.42 3$21,334.66 4$14,891.59 5$10,394.33 Depreciation schedule for Present machine Cost of Machine120000 Recovery period3 MACR depreciation200\% Salvage70000$70,113.25 YearDepreciation 1$19,680.00 2$16,452.48 OPERATION PLAN 1 OPERATION PLAN 3 Roberta Amaral Henriques Week 4 522 – Managerial Finance Aug 7, 2021 Southern States University Dr. Gus Del Rivero I would like to form a car dealer business which is a business that makes fresh or used vehicles at retailing through deals – with an automaker or its sales division. Its also capable of transporting a wide range of Approved Pre-Owned automobiles. It hires car salesmen to help them sell their autos. New vehicle sales account for only 5\% of a dealers profit on the median. The bulk about 50\% comes from components and service, with the rest 30\% coming from finance and insurance and the remaining from secondhand cars 15 percent. Therefore, the secondhand dealership qualifying to be a profitable business to be involved in. The car dealership business fits in the automobile industry where several elements, like engines and bodies, are engaged in the creation of motor vehicles, but tires, batteries, and fuel are not. Vehicles come in a variety of shapes and sizes, including passenger vehicles, cargo vehicles, and vehicles used in road and bridge constructions. Passenger vehicles are autos that are designed to carry people. Passenger vehicles include cabs, coaches, and personal automobiles. I choose a limited liability company legal structure, which is a type of private firm that incorporates elements of corporations and partnerships. Whilst keeping the limited liability position of organizations, limited liability firms can benefit from the versatility and stream taxation of partnerships with private companies. I would choose this form of a legal structure because; it can select from a variety of tax treatment alternatives. They can select between sole proprietorships, partnerships, as their tax structure. As long as the business fails to be handled as a corporation, it has the alternative of being regarded as a ripple entity (Mancuso, 2019). The benefits of companies are also available to limited liability companies. The firms limited liability position is the biggest advantage. The corporation is a separate legal organization. This safeguards participants and shareholders from being deemed held responsible for the companys actions and obligations. The NAICS code for the automotive industry is 423110. Acceptable current ratios vary depending on the industry, but for healthy organizations, they should be between 1 and 3. The higher the current ratio, the more capable the company is of paying its debts. If the ratio is less than one, the company will be unable to pay its debts when they fall due. The current ratio is used to evaluate a companys ability to repay short-term creditors with limited resources. The current ratio can be used to assess a companys operational efficiency or its ability to convert items into cash. Firms that are having trouble recovering debt or have a large inventory may be experiencing cash flow problems as a result of their failure to meet obligations. Comparing firms in the same industry is much more useful because of each firms different polarities. For the TATA motors company; The Holding Company is developing intangible resources and assesses it is’s earning unit for depreciation at least once a year (Rana, 2019). The passenger car product line has been designated as a distinct cash-generating unit by the Holding Company. The Holding Company recognized an intangible asset of 1,418.64 crores for this CGU as of March 31, 2020. The actual amount of the asset value in this CGU after depreciation is 9,120.31 crores. References Mancuso, A. (2019). Form your own limited liability company: create an LLC in any state. Nolo. Rana, S. (2019). Financial Analysis of Tata motors and Maruti Suzuki. Research review international journal of multi disciplinary volume, 4, 897-900.