Explain the nature and scope of investments to mark

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Reference no: EM131656632 , Length: word count:1500

Task Requirements-

The assignment requires you to prepare a business report using the template.

Assessment Task Information - Mark and Paul are university students studying marketing. They have been presented with two investment opportunities.

Investment One

The first opportunity is to invest in a new restaurant. If the investment is found to be worthwhile, they intend on having their opening night on 3 August, 2018.

Restaurant Purchases and Expenses

The investment requires the purchase of the following assets to begin trading:

Machinery/Equipment $110,000
Furniture (tables and chairs) $30,000
Vehicle (deliveries) $43,000
Utensils (cups, plates) $18,000
Produce (for 1 week) $10,000
Drinks (for 1 month) $20,000

The non-current assets would need to be purchased on 1 June to allow Mark and Paul to set up the restaurant in time for the big opening. As of 1 June, Mark and Paul will have $80,000 in their bank account.

Mark and Paul will be obtaining their produce and drinks from suppliers who allow them to purchase on credit. Based on their anticipated sales, they will be required to purchase $10,000 of produce for 1 weeks' worth of trading which will commence on 1 August and will continue each week. They will be required to repay this by the end of August.

They will also be purchasing 1 months' worth of drinks for $20,000 which will commence at the beginning of July and will continue each month. They will be required to repay their drink supply account off within 90 days of every purchase. They forecast that they will pay off 10% in the current month of purchase, 45% off 60 days after purchase and 45% off 90 days after purchase. For their first drink purchase, for example, they will repay 10% of the account off in July, 45% off in August and 45% off in September.

Mark and Paul will be managing the restaurant themselves and will be hiring 3 casual staff who will work 6 hours a day, 6 days a week at $23.00 an hour. Mark and Paul will be withdrawing $10,000 each per month from the businesses bank account as owner drawings. It is anticipated that the total overhead costs per month (beginning in June) will be $5,000.

Restaurant Sales

Mark and Paul believe, on average, that they will be able to sell 20,000 meals in the first month of trade, 18,000 in the second month, 18,000 in the third month and 22,000 in the fourth month at an average sale price of $45.00. They forecast that drink sales will be triple the amount of meals per month and will be at an average sale price of $6.00.

Investment One Requirements -

a. Identify and explain the nature and scope of investments to Mark and Paul.

b. Using the information presented above, prepare the following budgets for June, July, August and September:

Sales budget
Cash budget
Labour budget

c. In your own words, critically analyse the three budgets and the forecasted information that Mark and Paul have provided. Provide a discussion on what each of these budgets say about their new potential investment

d. What practical issues should Mark and Paul consider when making their decision to invest in the restaurant?

Investment Two -

The second opportunity is to invest their funds in a new business development on the Gold Coast with other venture-capital investors. The investment requires $390,000 from Mark and Paul. The investment promises net cash inflows over the four years of the investment of $100,000, $230,000, $190,000 and $140,000 respectively. The cost of the funds is 12 per cent.

Investment Two Requirements

a. Calculate the net present value, accounting rate of return and payback period (show all workings) and identify what they say about this investment.

b. Compare and contrast the two investments. Which investment would be best for Mark and Paul? (Hint: Are the investments comparable? Do they have enough funds? Are the identified nature and scope of investments and the practical issues associated with the investments going to be an issue for Paul and Mark? Are these investments suitable for Mark and Paul's needs? Do Mark and Paul have enough skills and time?).

Attachment:- Assignment Files.rar

Reference no: EM131656632

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Reviews

len1656632

9/25/2017 2:11:10 AM

Australian student, total 1500 words. Identification and explanation of nature and scope of investments. Demonstrated and astutely applied comprehensive knowledge of topic. Preparation of a Cash budget - Correct use of budget format. Calculations executed correctly with no/1 mistake/s. Preparation of a Labour budget - Correct use of budget format. Calculations executed correctly with no/ 1 mistake/s. Preparation of a Sales budget - Correct use of budget format. Calculations executed correctly with no/ 1 mistake/s. Critical analysis of sales, labour and cash budget as well as the forecasted information that Mark and Paul provided - Demonstrated a deep understanding, comprehension and interpretation of a cash, material and labour budget.

len1656632

9/25/2017 2:11:02 AM

Identification of practical issues that Mark and Paul should consider - Demonstrated a deep understanding and comprehension. Ratio calculation and interpretation (NPV, PP and ARR) - Correct use of ratio analysis. Calculations executed correctly with no/ 1 mistake/s. Compare and contrast the investments - Demonstrated and astutely applied comprehensive knowledge of topic. A compelling argument.

len1656632

9/25/2017 2:10:56 AM

Presentation of word document (i.e. table of contents, line spacing, headers, footers, page numbers), grammar & spelling - Report presents well with all business report requirements. Demonstrated exceptional use of grammar and spelling. Introduction and Executive summary - Purpose, Scope and limitations correctly identified with comprehensive knowledge about the task. Executive summary included all items within the report. Referencing - Minimum of 5 references using the Harvard style throughout. All references from academic sources correctly identified in the reference list. The correct use of Harvard referencing system and more academic references used.

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