Victor is between jobs right now. He was most recently sing on the board of an overseas oil and gas company. However, he was underqualified for the posion and was eventually let go. Since then, Victor has also sold some of his painngs for large sums of money. Victor feels frustrated by ongoing chater that he has only done well in his career as a result of his father, who holds a presgious posion with the federal government. Fortunately, Victor has a new idea. He wants to open a computer retail and repair shop. He recently had a problem with his own laptop repair. Aer dropping his laptop at Georges Electronics Repair and neglecng to pick it up, Victor unfortunately discovered that some sensive informaon about his personal life had been leaked to the press. Feeling angry about Georges lack of professionalism, Victor feels that he can open a more ethical repair shop which will compete with George. Victor is asking you for advice on business ethics, specifically which would apply to a computer repair business. Victor spoken to a friend, Linda, about this business idea and she has determined that he can feasibly sell eighty laptops in his first year of business at an average price of $900 per laptop. Victor has contacted a major computer manufacturer who has quoted him $3,825 for five laptops, $7,470 for ten laptops, or $72,000 for 100 laptops. Linda also projects one-hundred-and-fiy laptop repairs in the businesss first year, with each repair priced at $125. On average, a laptop repair would cost Victor $40 in labour costs (he cant do repairs himself but is hoping he can learn over me), $10 in materials, and $5 in variable overhead costs. Linda isnt confident projecng numbers beyond two years but thinks Victor should be able to grow sale and repair numbers by 55% in year two and at least sustain that level in following years. Linda has stressed that trend analysis is important. Victors addional expenses would be $1,500 a month for rent, $350 a month for ulies, and $200 a month for adversing. Victor plans to use a combinaon of debt and equity financing- he plans to pay interest of $250 a month and dividends totalling $15,000 at the end of the year. Since Victor knows many wealthy businesspeople around the world (mainly through a family friend named Barack), he foresees no issues with geng money- he is planning to just call people and ask them if they want to buy shares or loan money to his new company. Victor is wondering how much money he might be able to withdraw at the end of the businesss first year- he doesnt want to withdraw any cash which wasnt technically profit. He wants you to prepare, using proper formang, a first-year projected income statement and statement of retained earnings for him. Any insight about his projected numbers is greatly appreciated. He is especially interested in a few raos which will help him with important decisions him run a beter business- he has asked for specific scenarios and explanaons. Victor also wants feedback on his plan to use a combinaon of debt and equity financing. What is an opmal financing mix for a business like his? What specifically should he know about such a decision? Are there any benefits and drawbacks of using equity? What about debt?

If the business does well, Victor might consider buying a $45,000 machine which would cut the labor cost of a laptop repair to only $15. The machine can repair an esmated 1,500 laptops before it needs to be replaced. Aer doing some rough math he is not really confident in, Victor is wondering if he should buy the machine now instead of waing. He is also not sure how the machine will be depreciated- he wants you to advise him on the best depreciaon method for this situaon and how the informaon will be presented on the income statement and balance sheet. Finally, Victor highly values the local indigenous community and wants to help its members, especially children. He is thinking about gathering volunteer help to produce fiy laptops to sell to a local school at cost (in future, he hopes to donate them for free). Victor wants you to explain, in detail, how costs can be tracked for these fiy laptops, assuming some specialized workers such as supervisors are paid hourly. He also wants you to take into consideraon assembly line worker costs (assuming he cant find enough volunteers), ulies costs, etc. Be sure to give Victor an idea about the necessary journal entries and other important elements. Victor acknowledges that he has gone through a real struggle in his life but is dedicated to turning things around with an ethical, well-run laptop retail and repair business. In a business memo draed by yourself (and not anyone else nor arficial intelligence) to him, give Victor detailed advice on all issues raised in the case. Feel free to add general business or life advice which may benefit Victor.