I am doing a business plan and the Risks and insurance; Investing Excess Funds is the part that I am stuck on. I got a negative NPV, so the professor said to assume that I got a $10,000 via a short-term bank loan. The question was A key first decision is whether you wish to invest in short-term option(s) or long-term option(s). Please describe the investment(s) into which you would place your businesss excess funds the type of investment, the amount, and the time-frame. I am doing a small tracker device business that has one traditional store and e-commerce. If I can get a detailed explained that will be better. 
Total depreciation = 1,165.58 + 1,071.7 = $2,237.28 I can then access the pro forma (i.e., projected) Income Statement that I prepared for my proposed tracker business in Part Two of this Small Business Plan. On my pro forma Income Statement, I estimated that the Net Income in the first year of operation of the tracker business would be -$30,138.04. To this amount, I can add the Depreciation Expense of $2,237.28 listed above to calculate the Year One Cash Flow: Year One Net Profit After Taxes + Annual Depreciation Expense Year One Cash Flow + -$30,138.04 $2,237.28 -$27,900.76 This Year One Cash Flow is assumed to occur on December 31 of the year. I can then discount it back to the present (t = 0) using the WACC that I calculated for my tracker business in Part B of this analysis. My WACC is estimated to be 31.3%. To allow the use of Table B-2 in Appendix B (the Present Value Interest Factor PVIF table), I will round my WACC to the nearest whole percentage: 31.0%. I can then calculate the present value today (i.e., at t= 0) of my Year One Cash Flow: Year One Cash Flow X (PVIF 31%, 1) = Present Value 4 -$27,900.76 X 0.7634= -$21,299.44 I can then calculate the NPV for my fixed asset investment, as follows: Present Value of Year One Cash Flow Less: Fixed Asset Investment Net Present Value -$21,299.44 13,281.303 -$34,580.74 Unit Cost $315 $8,800 $1,300 $350 Quantity 1 1 1 2 Total Cost $315 $8,800 $1,300 $700 Item 1) Copyrights 2) Patent 3) Trademark 4) Long display table 5) Bar stools (Set of 4) 6) Tracker displays 7) Shelves 8) Pamphlets 9) Couch $200 2 $400 $1.25 100 $125 $180 $0.05 $650 2 5000 1 Subtotal Sales Tax @ 2.9% Grand total $360 $257 $650 $12,907 $374.303 $13,281.303 After I have obtained the cost of the items on my fixed asset list, I can then subtotal these costs; the result of this addition is $13,322.463. I can then look up the Colorado state sales tax rate on- line by typing Colorado sales tax rate into the Search Box at www.google.com. The following search result then appears: The Colorado (CO) state sales tax rate is currently 2.9%. For my fixed asset analysis, I will use this 2.9% Minnesota state sales tax rate. Fixed asset subtotal X Sales tax rate = Sales tax owing $12,907 X 0.029 = $374.303 Sales Tax I can then sum the fixed asset subtotal and the sales tax amounts together to calculate the total estimated cost for the fixed assets on my list: Fixed asset subtotal + Sales Tax = Grand Total Cost $12,907 + $374.303 = $13,281.303, Grand Total Cost Total depreciation = 1,165.58 + 1,071.7 = $2,237.28 I can then access the pro forma (i.e., projected) Income Statement that I prepared for my proposed tracker business in Part Two of this Small Business Plan. On my pro forma Income Statement, I estimated that the Net Income in the first year of operation of the tracker business would be -$30,138.04. To this amount, I can add the Depreciation Expense of $2,237.28 listed above to calculate the Year One Cash Flow: Year One Net Profit After Taxes + Annual Depreciation Expense Year One Cash Flow + -$30,138.04 $2,237.28 -$27,900.76 This Year One Cash Flow is assumed to occur on December 31 of the year. I can then discount it back to the present (t = 0) using the WACC that I calculated for my tracker business in Part B of this analysis. My WACC is estimated to be 31.3%. To allow the use of Table B-2 in Appendix B (the Present Value Interest Factor PVIF table), I will round my WACC to the nearest whole percentage: 31.0%. I can then calculate the present value today (i.e., at t= 0) of my Year One Cash Flow: Year One Cash Flow X (PVIF 31%, 1) = Present Value 4 -$27,900.76 X 0.7634= -$21,299.44 I can then calculate the NPV for my fixed asset investment, as follows: Present Value of Year One Cash Flow Less: Fixed Asset Investment Net Present Value -$21,299.44 13,281.303 -$34,580.74 Unit Cost $315 $8,800 $1,300 $350 Quantity 1 1 1 2 Total Cost $315 $8,800 $1,300 $700 Item 1) Copyrights 2) Patent 3) Trademark 4) Long display table 5) Bar stools (Set of 4) 6) Tracker displays 7) Shelves 8) Pamphlets 9) Couch $200 2 $400 $1.25 100 $125 $180 $0.05 $650 2 5000 1 Subtotal Sales Tax @ 2.9% Grand total $360 $257 $650 $12,907 $374.303 $13,281.303 After I have obtained the cost of the items on my fixed asset list, I can then subtotal these costs; the result of this addition is $13,322.463. I can then look up the Colorado state sales tax rate on- line by typing Colorado sales tax rate into the Search Box at www.google.com. The following search result then appears: The Colorado (CO) state sales tax rate is currently 2.9%. For my fixed asset analysis, I will use this 2.9% Minnesota state sales tax rate. Fixed asset subtotal X Sales tax rate = Sales tax owing $12,907 X 0.029 = $374.303 Sales Tax I can then sum the fixed asset subtotal and the sales tax amounts together to calculate the total estimated cost for the fixed assets on my list: Fixed asset subtotal + Sales Tax = Grand Total Cost $12,907 + $374.303 = $13,281.303, Grand Total Cost
