Reference no: EM132508422

Question 1. Tom has recently inherited $600,000.00 from his late mother. He intends to use the money to purchase an empty warehouse in his suburb and use the remaining money to commence an import / export from this premises. He intends to hire at least 25 staff in the first month of commencing operations. He has come to you for advice regarding which business structure would best suit his planned venture and would like to know what initial and ongoing compliance requirements with government regulators he would likely encounter.

Question 2. Would your advice to Tom be different if instead of having $600,000, Tom only had $500.00, and instead of operating from a warehouse he intended to do importing / exporting via his laptop in his apartment?

Question 3. A client of yours is experiencing expanding of his business rapidly, he needs to consider if he should purchase a new machine for his business. He has come to you for your advice. The relevant details are provided below,

1. Machine cost $120,000
2. Expected operating life 5 years
3. Expected scrap value at the end of 5 years $20,000
4. Annual depreciation $20,000
5. Expected annual cash inflows from operations $40,000

a. What is the payback period? Please show calculation.

b. What is the advantages and disadvantages of using payback period as your investment decision?