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Victor's Laptop Retail and Repair Victor is between jobs right now. He was most recently sitting on the board of an overseas oil and gas
Victor's Laptop Retail and Repair Victor is between jobs right now. He was most recently sitting on the board of an overseas oil and gas company. However, he was underqualified for the position and was eventually let go. Since then, Victor has also sold some of his paintings for large sums of money. Victor feels frustrated by ongoing chatter that he has only done well in his career as a result of his father, who holds a prestigious position 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. After dropping his laptop at George's Electronics Repair and neglecting to pick it up, Victor unfortunately discovered that some sensitive information about his personal life had been leaked to the press. Feeling angry about George's 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-fifty laptop repairs in the business's first year, with each repair priced at $125. On average, a laptop repair would cost Victor $40 in labour costs (he can't do repairs himself but is hoping he can learn over time, $10 in materials, and $5 in variable overhead costs. Linda isn't confident projecting numbers beyond two years but thinks Victor should be able to grow sale and repair numbers by 55% in vear two and at least sustain that level in following vears. Linda has stressed that trend analysis is important. Victor's additional expenses would be $1,500 a month for rent, $350 a month for utilities, and $200 a month for advertising. Victor plans to use a combination 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 getting money- he is planning to just call people and ask them it 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 business's first year- he doesn't want to withdraw any cash which wasn't technically "profit". He wants you to prepare, using proper tormatting, 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 ratios which will help him with important decisions him run a better business- he has asked for specific scenaros and exolanations. Victor also wants feedback on his plan to use a combination of debt and equity financing. What is an optimal 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 lanton repair to only Sis. The machine can repair an estimated 500 antons before it needs to be replaced. After doing some rough math he is not really confident in, Victor is wondering if he should buy the machine now instead of waiting. He is also not sure how the machine will be depreciated- he wants you to advise him on the best depreciation method for this situation and how the information 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 fifty laptops to sell to a local school at be tracked for these nity laptoos, assuming some scecialized workers such as supervisors are paid hourly. He also wants vou to take into consideration assembly line worker costs assuming he can't find enough volunteers), utilities 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 etnica. well-run laptoo retail and repair business. in a business memo dratted by yourself (and not anyone else nor artificial 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
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