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PLEASE READ THE INSTRUCTIONS CAREFULLY. THIS IS A CHALLENGING ASSIGNMENT, PLEASE START EARLY SO THAT I CAN SUBMIT IT ON TIME. LET ME KNOW IF YOU HAVE ANY QUESTIONS
Directions. REVIEW THE DESCRIPTION AND FOLLOW GRADING RUBRIC
Executive Summary and Pro Forma
The Student is to prepare an Executive Summary for a Business Venture along with a Pro Forma Income Statement. The student is encouraged to select areas of interest to them and there are no restrictions as to what business can be analyzed.
*The student is advised not to disclose any trade secrets or ideas which might harm them or others.
The details of what is to be submitted follows. A grading Rubric is also provided as a guideline.
The Executive Summary
- Two to three pages.
- Briefly outlining the opportunity, management, markets serviced, business plan (growth) and any relevant information.
- Capital or other funding sought
10-year Income Pro Forma and After Tax Cash Flow
- Estimate what costs are needed to start or initially fund your business opportunity.
- Sale Growth should be incorporated into this financial model
- After Tax Cash Flow is to be used to calculate the NPV and IRR for the project
The Executive Summary is a “marketing document” and should be graded on quality of presentation, “looks”, ease of reading and content. Outside the box thinking for ideas and ventures is encouraged; however, this must be throttled against realistic opportunities. The accompanying pro forma should match what is outlined in the Executive Summary.
10% – Form (Presentation)
10% – Topics are covered
5% – Spelling
15% – Well thought out plan (not the business itself)
20% – Accounting Issues (i.e., Proper Income Statement)
15% – After Tax Cash Flow
20% – NPV IRR analysis (i.e., calculation)
5% – Presentation
- An explanation of depreciation line items is needed (note, a depreciation schedule is not necessarily needed)
- Assume all tax rates (ordinary and long term) are fixed at 40%
- Calculate an Exit Value as follows:
- Find the cash flow for year 10
- Apply some multiple to that cash flow to determine the sales price to another entity.
- Research this value or multiple
- Determine the after tax cash flow (sales price less taxes)
- In your Executive Summary, you are to describe the capital structure of your opportunity. This will also define your total investment.
- Use the investment as your cash outlay against the cash generated from each yearâ€™s activity (including year 10) AND the price you will receive in year 10 from selling the ongoing business. (That is, assume you run the business for all of year 10 then on the last day you sell it and also receive that after tax cash flow).
- Calculate your NPV and IRR for the opportunity at hand.
- NOTE: it is important that you donâ€™t adjust numbers for your instructor!!! What that means is your business may not be profitable! You do not have to create a profitable business for this assignment.