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Scenario Your family business is expanding. Based on your experience and in depth knowledge of the market, you have estimated the following results for the

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Scenario Your family business is expanding. Based on your experience and in depth knowledge of the market, you have estimated the following results for the first 2 years (8 quarters) of the project. . Expected revenues for the first two years are as follows. 0 In addition, sales for the is quarter of Year 3 are projected at $520,000. Year 1 (0005) Year 2 (0005) Q1 Q4 Q1 Q2 Q3 Q4 40 72 128 160 224 280 352 440 General and administrative expenses (wages, taxes, office etc.) are estimated to be 15% of sales. Sales salaries and commissions are estimated to be 10%% of sales. Accounts receivable at the beginning of this expansion are $0. 0 Collection period = 30 days . Accounts payable at the beginning of the expansion are $0. 0 The Company quarterly purchases from suppliers = 60%% of the next quarter's forecasted sales. 0 Suppliers are paid on average in 60 days. You will need to buy new equipment & furniture in both Year 1 - Q1 and Year 1- Q4 for $40,000 ($80,000 total in Year 1). * To help start the expansion you have secured an initial cash loan from the bank of $80,000. Interest on this loan is $2,400 per quarter. The company will pay back the full $80,000 in the Year 2 - Q4. Interest on any additional short-term borrowing is expected to be 3% per quarter. " The Company wishes to maintain an $80,000 minimum balance at all times to best manage its working capital and any unexpected commitments. Question #1 - (20 marks) 1. Based on the information above build a Cash Budget for the expansion. Use Appendix A 2. From above, does the company require any short-term financing? Explain. (50 - 100 words) a.If so, use the template in Appendix B to build a Short-Term Financing Plan. Question #2 - (10 marks) 1. What are your thoughts on the viability of the expansion? Consider Both the above budgets b . Some of the project evaluation tools from Chapters 9 & 10

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