Scenario One: Custom RV Robert operates a successful business customizing vehicles (ie, work vans and camper vans). Customers arrive with an empty van (eg. Sprinter vans, GMC panel vans and Ford Econoline vans) and Robert orders, builds and installs customized cabinets, shelves, sinks, beds and even solar charging systems to operate reading lights, other electronics and a small refrigerator. Everything is built according to the individual customers' preferences and needs for their vehicles. The company has 42 employees including tradespeople, salespeople, operations and administration staff. Robert has three children. Two of his children, Nathan and Emily, who are relatively inexperienced at working in the family business, are currently training in management positions. A third child, John, does not work in the business at all. Robert wants to scale back involvement in the business so he and his wife can move away and enjoy their retirement years together. He set up family partnerships and trusts and the family's perception is that the business succession plan is complete. A year later, Robert is ready to retire, but cannot because the siblings are foundering in their management development. When Robert finally does pull away, Nathan and Emily assert their leadership in the resulting vacuum despite their lack of preparedness. Several customers leave, sales fall off, and the top salespeople go to the competition John wants Nathan and Emily demoted or fired to protect the value of the inheritance. Robert worries about the value of his stake as a source of retirement funding Months later, company operations continue to suffer. The children are no longer speaking with each other and holiday get-togethers are cancelled Source: Adopted from: Business succession planning: cultivating enduring value by Deloitte Development LLC (2013) What are two factors that should be considered in determining a firm's capitalization rate and what would be the impact of each factor you listed on the capitalization rate? Use examples from Custom RV to help explain what factors might influence the capitalization rate for Custom RV (4 marks). Scenario One: Custom RV Robert operates a successful business customizing vehicles (ie, work vans and camper vans). Customers arrive with an empty van (eg. Sprinter vans, GMC panel vans and Ford Econoline vans) and Robert orders, builds and installs customized cabinets, shelves, sinks, beds and even solar charging systems to operate reading lights, other electronics and a small refrigerator. Everything is built according to the individual customers' preferences and needs for their vehicles. The company has 42 employees including tradespeople, salespeople, operations and administration staff. Robert has three children. Two of his children, Nathan and Emily, who are relatively inexperienced at working in the family business, are currently training in management positions. A third child, John, does not work in the business at all. Robert wants to scale back involvement in the business so he and his wife can move away and enjoy their retirement years together. He set up family partnerships and trusts and the family's perception is that the business succession plan is complete. A year later, Robert is ready to retire, but cannot because the siblings are foundering in their management development. When Robert finally does pull away, Nathan and Emily assert their leadership in the resulting vacuum despite their lack of preparedness. Several customers leave, sales fall off, and the top salespeople go to the competition John wants Nathan and Emily demoted or fired to protect the value of the inheritance. Robert worries about the value of his stake as a source of retirement funding Months later, company operations continue to suffer. The children are no longer speaking with each other and holiday get-togethers are cancelled Source: Adopted from: Business succession planning: cultivating enduring value by Deloitte Development LLC (2013) What are two factors that should be considered in determining a firm's capitalization rate and what would be the impact of each factor you listed on the capitalization rate? Use examples from Custom RV to help explain what factors might influence the capitalization rate for Custom RV (4 marks)