2. Lawrence Samuels*LawSamuels@hotamil.com *
JANUARY 2012 TO JANUARY 2013
BUSINESS LEADERS
International Community
Portfolio for your Perusal
Thank you, for taking the time to learn more about me. I hope my skills, qualifications, and pursuit
of excellence will not only meet your requirements but inspire you to reach higher. Enclosed are
details about me which include:
1. Corporate Valuation and Forecasting
2. Accounting entries
3. Statistical Analysis
4. Additional Tools and Resources
Many will say “you cannot judge a book by its cover,” not only do I wish my cover page passes your
perusal but also I hope my portfolio will create the drive for us to build a lasting relationship. A
good team can foster change and continue to make a difference in all business pursuits. Not only is
this an invitation for a long-term partnership but also a call of action for you to make a choice today.
Again, thank you for the opportunity and I hope I too can learn more about you.
Sincerely,
Lawrence Samuels
mailto:LawSamuels@hotmail.com?subject=Contact
"There are two ways of spreading light: to be the candle or the mirror that reflects it."
- Edith Wharton-
1|Page
3. TABLE OF CONTENTS
INVITATION LETTER: 1
THUMBS UP CORPORATION 3
BACKGROUND 4
MARKETING OVERVIEW 5-6
2010 BUSINESS OVERVIEW 8
FIRST QUARTER SALES RESULTS 101 9
SECOND QUARTER SALES RESULTS 101 10
THIRD QUARTER SALES RESULTS 101 11
FOURTH QUARTER SALES RESULTS 101 12
YEAR ENDING DECEMBER 2010 REGION RESULTS 13
YEAR ENDED IN DECEMBER 2010 14
ADDITIONAL JOURNAL ENTRIES 15
2011 AFN BUDGET AND 5 YEAR FORECASTED STATEMENTS TARGETS 16
FORECASTED BALANCE SHEET 17
EXPANSION PROJECT EVALUATION 18
INDIA PROJECT ANALYSIS 19-20
SOUTH AMERICA PROJECT 20-21
SERVICE ANALYSIS 21
DETAILED BUDGET 22
2|Page
5. Thumbs Up Corporation
BACKGROUND
Corporation was founded in 2009, by three entrepreneurs on
a journey to make everyone happy. Frisbee Jersey, owner and
co-founder, said he wanted to bring “laughter to millions and
excitement for all.” Thumbs Up’s founders have contributed
much of their success to Disney philosophy of seeking “the
ultimate element of surprise.” They pride themselves on a
vision towards satisfying their customers and employees first
and performance and profits are the true measures of their
customer-employee relationships. In turn, profits and
performance are the ultimate payoff.
PROJECTS
The three entrepreneurs set up two mutually inclusive projects: One located in the west and the other in
the south east to generate buzz about the products and establish a customer based. They wanted to
know who is attractive to the product, what price are consumers willing to pay, and where they should
sell the products. With an initial investment of 695 thousand dollars in the west and 575 thousand
dollars in the east they begin positioning their product by product class and use into small businesses
and retail outlets. Project A, the west region, they projected cash inflows on a 7 month time period with
a rate of return of 25.67 percent in comparison to Project B, East Region, which they reached 38.79
percent. The payback period was 6 months for both projects considering the free samples in the west
sales growth was slower in the first 3 months with cash inflows of: -300,000 and -200,000 however in
the 4 remaining months the team was able to generate over 3.3 million in cash flows.
NPV AT WEIGHTED AVERAGE COST ON CAPITAL
Project A ProjectB
($695) ($575)
Expected Net Cash Flows @ 8% cost of capital
0% $2,131 $1,060
2% $1,819.21 $940
Time Project A Project B WACC = 8%
4% $1,545.94 $834 0 ($695) ($575)
6% $1,305.74 $739
8% $1,094.02 $654 1 ($300) $290 NPV A = $1,094.02
10% $906.92 $577
12% $741.15 $509 2 ($200) $290 NPV B = $653.80
14% $593.92 $446
16% $462.87 $390
3 $500 $190
18% $345.95 $339
4 $600 $190
20% $241.41 $292
22% $147.77 $249 5 $600 $190
24% $63.71 $210
26% ($11.89) $174 6 $926 $190
28% ($79.99) $141
30% ($141.45) $110 7 $700 $295
4|Page
6. Thumbs Up Corporation
REINVESTMENT OF CASH FLOWS
With the cash flows the group reinvested the cash inflows at the 8 percent costs on capital and
established 5 offices in the United States and purchase a T-bill with a return of 8 percent. The three
founded thumbs up Corporation and created 5 sales offices in the United States and updated their
software to gear for the first product launch. With prototypes already out, the team is targeting those
customers in the first quarter to upgrade their software and hardware so they can ride with excitement.
MISSION STATEMENT
To create value, convenience, style and Luxury to shareholders by bringing excitement to millions and
creating a relationship through outstanding customer
interactions and products that are the ultimate element of
satisfaction.
SCOPE
Our plan is to create wealth for our owners and excitement for
our customers and community by inspiring our employees to aim
high in their career goals and convey leadership that enhances
the profitability of the company and lifestyle of our customers. The company will provide exceptional
service, pricing that is affordable, and high quality products by focusing on innovation, and creativity
that differentiates us from our competitors.
OBJECTIVES
1. 50 percent Market Share by 2016
2. High Return on Equity
3. Promising Growth of all products and Services
4. High Free Cash Flows
5. Focus on the personality of the brand and the lifestyle of our customers
6. Create value for all generations and cultures. Simply, everyone.
STRATEGIES
Freebie believed that he will achieve his goals by offering products and services that are competitive,
financing options that appeal to the masses, packaging products to extend value, and to create strong
sales teams across all regions that will support their financial growth. By establishing a strong workforce
they believe they will be able increase operating expenses to expand, increase sales in rural and urban
areas -expand without restricting their profitability and also, to provide the workforce with the tools and
resources necessary to achieve their sales targets.
5|Page
7. Marketing Overview
TARGETING AND SEGMENTING
The company in the past targeted doers, innovators, Believers, thinkers and experiencers with a product
line that’s new and hip. From their test market results they were astonished by customer responses and
had positive field focus groups. They distributed thousands of samples and information in metropolitan
Markets where they intend to expand their operations. The founders expect a promising year and
some analysts say there returns can be as high as 12 percent.
For 2010, the company will be launching a marketing campaign that targets generations rather than
personality types. They will also, use a strategic social media strategy to increase online sales and build
brand awareness. The company seeks to position the product by use and class by communicating the
benefits of using the product and luxury attributes that differentiates the product from their
competitors. With such a strategy the company hopes to close the gap between the customer
perceptions of the product in comparison to their competitors.
In an industry of complexity, the company seeks to increase ownership experience and create a long
term connection with their customers by managing their product lifecycle with their customer lifestyle,
and managing the consumer purchasing behavior through promotions and direct advertising, in order to
achieve a 15 percent growth over the next 5 years. To accomplish this goal, the company will be
expanding their product line and advertising new product launches through targeted mass media.
Thumbs up corporation understand that the point of contact at their sales offices will determine the
success they will have with sales so they shift their focus on providing their customers with the exciting
experience that they would receive by using their products, mere excitement!
INCREASING OWNERSHIP EXPERIENCE AND CUSTOMER INTERACTIONS
6|Page
8. Operations Overview
MARKETING TACTICS
Thumbs up corporation asked themselves where do their customers spend most of their time and how
can they penetrate the market and reach as many customers as possible? To answer such a questions
the company deducted surveys and found out that many of their customers are either at work, school,
spending time with the family, or taking part in extracurricular activities in the community. With the
information the company decided to use 4 marketing tactics aimed at aligning their attributes of style
and luxury to their target market concern with identity, security, and status: (Generational Traits)
1. Relationship Marketing through partnerships with corporations
2. Generation Marketing to target diverse social groups and the masses
3. Multicultural Marketing to target every race with cultural tactics and use generation and
Multicultural marketing interchangeably.
4. Green Marketing to educate their consumers to their social responsibility policies through
public relations efforts and advertising. Use as a tactic with Generation Marketing.
MARKETING MAP
7|Page
12. Forecasted Unit Sales
Cash Budget
Thumbs up Corporation require financing of 1,732,076.22 to cover 12 months of operations to
sustain a minimum cash balance of 3,100,000 for the year. The three owners assume that if 20
percent of sales were account receivables than, the remaining units sold will be in form of cash in
which if those funds are not invested the company will have approx. 3 million of excessive cash.
Forecasted Unit sales
January February March April May June July August September October November December Total
Northeast 456.00 457.00 434.15 443.27 558.52 557.49 724.73 507.31 456.58 483.98 496.08 489.63 6064.73
East 441.00 441.00 418.95 427.33 538.43 537.38 591.12 413.79 372.41 350.06 341.31 336.53 5209.32
Southeast 412.00 412.00 391.40 399.23 503.03 502.00 552.20 386.54 347.88 327.01 318.84 314.37 4866.49
Midwest 434.00 434.00 412.30 420.55 529.89 528.92 317.35 222.15 199.93 187.94 183.24 180.67 4050.92
Southwest 399.00 400.00 380.00 387.98 527.65 526.60 537.13 375.99 417.35 392.31 382.50 377.15 5103.69
West 458.00 459.00 436.05 445.21 560.96 559.91 571.11 399.78 443.75 470.38 482.14 475.87 5762.15
Total 2600.00 2603.00 2472.85 2523.56 3218.48 3212.30 3293.65 2305.55 2237.91 2211.68 2204.10 2174.22 31057.30
Cumulative 2600.00 5203.00 7675.85 10199.41 13417.89 16630.19 19923.83 22229.39 24467.30 26678.97 28883.07 31057.30
Forecasted Sales
Northeast 36475.44 36555.43 34727.66 35456.94 44675.74 44593.35 57971.36 40579.95 36521.96 38713.27 39681.11 39165.25 485117.47
East 35275.59 35275.59 33511.81 34182.05 43069.38 42985.39 47283.93 33098.75 29788.87 28001.54 27301.50 26919.28 416693.69
Southeast 32955.88 32955.88 31308.09 31934.25 40237.15 40154.76 44170.24 30919.17 27827.25 26157.62 25503.67 25146.62 389270.58
Midwest 34715.66 34715.66 32979.88 33639.47 42385.74 42308.15 25384.89 17769.42 15992.48 15032.93 14657.11 14451.91 324033.29
Southwest 31916.01 31996.00 30396.20 31034.52 42206.95 42122.96 42965.42 30075.79 33384.13 31381.08 30596.55 30168.20 408243.81
West 36635.42 36715.41 34879.64 35612.11 44871.26 44787.27 45683.02 31978.11 35495.70 37625.45 38566.08 38064.72 460914.20
Total Sales $ 207,974.00 $ 208,213.97 $ 197,803.27 $ 201,859.34 $ 257,446.22 $ 256,951.88 $ 263,458.85 $ 184,421.19 $ 179,010.40 $ 176,911.89 $ 176,306.03 $ 173,915.99 $2,484,273.04
Cumulative $ 207,974.00 $ 416,187.97 $ 613,991.24 $ 815,850.58 $ 1,073,296.80 $ 1,330,248.69 $ 1,593,707.54 $ 1,778,128.73 $ 1,957,139.13 $ 2,134,051.02 $ 2,310,357.05 $ 2,484,273.04
Expenses
Administrative/CGS/ 41,594.80 60,382.05 57,362.95 58,539.21 74,659.40 74,516.05 76,403.07 53,482.15 51,913.01 51,304.45 51,128.75 50,435.64 701,721.52
R&D 4,159.48 6,246.42 5,934.10 6,055.78 7,723.39 7,708.56 7,903.77 5,532.64 5,370.31 5,307.36 5,289.18 5,217.48 72,448.45
Marketing 31,196.10 10,410.70 9,890.16 10,092.97 12,872.31 12,847.59 13,172.94 9,221.06 8,950.52 8,845.59 8,815.30 8,695.80 145,011.05
Bonus 2,079.74 2,082.14 1,978.03 2,018.59 2,574.46 2,569.52 2,634.59 1,844.21 1,790.10 1,769.12 1,763.06 1,739.16 24,842.73
Finance 2,079.74 2,082.14 1,978.03 2,018.59 2,574.46 2,569.52 2,634.59 1,844.21 1,790.10 1,769.12 1,763.06 1,739.16 24,842.73
Total Expenses $ 81,109.86 $ 81,203.45 $ 77,143.28 $ 78,725.14 $ 100,404.03 $ 100,211.23 $ 102,748.95 $ 71,924.27 $ 69,814.05 $ 68,995.64 $ 68,759.35 $ 67,827.24 $ 968,866.48
Cumulative $ 81,109.86 $ 162,313.31 $ 239,456.58 $ 318,181.73 $ 418,585.75 $ 518,796.99 $ 621,545.94 $ 693,470.20 $ 763,284.26 $ 832,279.90 $ 901,039.25 $ 968,866.48
Operating Income 126,864.14 127,010.52 120,660.00 123,134.20 157,042.19 156,740.65 160,709.90 112,496.93 109,196.34 107,916.25 107,546.68 106,088.76 1,515,406.55
Minimum Cash $ 262,047.24 $ 262,349.60 $ 249,232.12 $ 254,342.77 $ 324,382.24 $ 323,759.37 $ 331,958.15 $ 232,370.71 $ 225,553.10 $ 222,908.98 $ 222,145.60 $ 219,134.15 $ 3,130,184.03
Required Financing (135,183.10) (135,339.08) (128,572.13) (131,208.57) (167,340.04) (167,018.72) (171,248.25) (119,873.78) (116,356.76) (114,992.73) (114,598.92) (113,045.39) (1,614,777.47)
11 | P a g e
13. Financing
REGIONS
Mongote Bank approved a loan for 804, 531 with the costs of capital at 10 percent; the company
with the funds attained the plant and equipment, inventory, and reinvested 120,000 in a portfolio of
stocks with an average return of 15 percent. The companies established 5 regions: Northeast, East,
South, Southwest and West and linked those regions with the small offices purchase after test
market projects A and B. Within the 5 regions exists 3 divisions; with unit costs 9.65 the company
decided to purchase 21195 units and distributed across the regions. The company also sold 300,000
shares of stock to raise additional capital at par value 10 dollars a share. With this capital the
company is considering expanding their operations in the future and how they should they invest
such funds short-term to raise additional capital. Unfortunately, the bond market is poor with
returns lower than 5 percent therefore management receded their decision to purchase bonds and
instead decided in December they will purchase stocks, receive dividends, and then sell the stocks in
January.
S OLD 300,000 SHARES OF C OMMON S TOCK FOR 5 DOLLARS PER SHARE AND PURCHASE A PATENT FOR 125,000. (1,375,000).
Capital Stock (30000 shares 10) 300,000
Additional Paid in Capital 2,625,000
M ONGOTE B ANK APPROVED A LOAN FOR 804,531, THE FUNDS WERE ALLOCATED : (A DJUSTMENT FOR CASH )
Jan 23, 2010 Approved Loan
Cash-Marketable securities 120,000.00
Inventory 204,531.00
Plant and equipment 480,000.00
Account Payable and Personal loan 804,531.75
PURCHASE OF STOCK A WITH AN EXPECTED RETURN OF 15 %
Investment in Stock A 120,000
Cash 120,000
Prepaid Rent 25,000
Cash 25, 00
12 | P a g e
15. First Quarter
Record of Sales
Cash 394,538.93
Account Receivable 163,872.92
Sales Revenue 801,619
Record of Goods Sold
Costs of Goods Sold 96,731.6
Inventory 96,731.6
Divisional Sales
COLLECTIONS FROM CUSTOMERS
Total Quarter 1
Cash 47,522
Services
Account Receivable 47,522
Technology
Car Units
0.00 5000.00
10000.005000.00
1
14 | P a g e
16. First Quarter
Region Products Units Sold Cost per Unit Profit Price Per Unit Earnings Total Operating Costs Account Recv Cash Sales EBIT
North East Unit Sales Car Units 641 62.39 97.59 159.98 62,553.78 39,993.40 185.89 44,413.18 62,553.78
Technology 613 19.50 30.49 49.99 18,692.76 11,951.11 177.77 13,271.86 18,692.76
Consumer goods 342 15.60 24.39 39.99 8,342.71 5,333.87 99.18 5,923.33 8,342.71
91416287.62 Total 1596 97.48 152.48 249.96 89,589.25 57,278.38 462.84 63,608.37 89,589.25
East Car Units 748 58.50 91.49 149.99 68,437.44 43,755.08 216.92 48,590.58 68,437.44
Technology 602 11.70 18.29 29.99 11,012.93 7,041.05 174.58 7,819.18 11,012.93
Consumer goods 339 11.70 18.29 29.99 6,201.63 3,964.98 204 2,469.68 6,201.63
Total East 1689 81.89 128.08 209.97 85,652.00 54,761.11 595.5 58879.43565 85,652.00
South East Car Units 733 62.39 97.59 159.98 71,531.86 45,733.48 212.57 50,787.62 71,531.86
Technology 587 15.60 24.39 39.99 14,319.22 9,154.91 170.23 10,166.65 14,319.22
Consumer goods 391 15.60 24.39 39.99 9,538.01 6,098.08 113.39 6,771.99 9,538.01
Total 1711 93.58 146.38 239.96 95,389.09 60,986.47 496.19 67726.25504 95,389.09
Midwest Car Units 676 62.39 97.59 159.98 65,969.35 42,177.13 196.04 46,838.24 65,969.35
Technology 541 15.60 24.39 39.99 13,197.10 8,437.49 156.89 9,369.94 13,197.10
Consumer goods 372 15.60 24.39 39.99 9,074.53 5,801.75 107.88 6,442.92 9,074.53
Total 1589 93.58 146.38 239.96 88,240.98 56,416.37 460.81 62651.09829 88,240.98
Southwest Car Units 691 58.50 91.49 149.99 63,222.28 40,420.81 200.39 44,887.82 63,222.28
Technology 552 19.50 30.49 49.99 16,832.63 10,761.85 160.08 11,951.17 16,832.63
Consumer goods 368 15.60 24.39 39.99 8,976.96 5,739.36 106.72 6,373.64 8,976.96
Total 920 35.09 54.89 239.97 89,031.87 56,922.02 467.19 63,212.63 89,031.87
West Car Units 783 66.30 103.69 169.99 81,192.32 51,909.85 227.07 57,646.55 81,192.32
Technology 627 19.50 30.49 49.99 19,119.68 12,224.05 181.83 13,574.97 19,119.68
Consumer goods 418 15.60 24.39 39.99 10,196.65 6,519.17 121.22 7,239.62 10,196.65
Total 1828 101.3883 158.58 259.97 110,508.65 70,653.07 530.12 78,461.14 110,508.65
Sales $746,546.67
Operating Costs $ 357,017.41
Earnings Before Interest and Taxes $558,411.85
In the first quarter the company sold over 10,000 core products, car units exceeding 4,000 sales.
The average amount of units sold per region was over 1,600 with the west region leading the
way in each product category with 1,828 total unit sales. The company operation before
interest and taxes is performing well. Total Cash sales are 394,538.93 with a total earnings
before interest and taxes of 558, 411.85.
15 | P a g e
17. Second Quarter
STANTON BANK APPROVED A LOAN;
THE FUNDS WERE ALLOCATED TOWARDS
INVENTORY , REINVESTMENT , AND PLANT
AND EQUIPMENT FOLLOWING :
Cash -Marketable securities
480,000.00
Inventory
204,531.00
Plant and equipment
120,000
Account Payable
804,531.75
April 23, 2010 to June 23, 2010(11181
Units for 9.65 Unit)
Cash
437,955.34
Account Receivables 456, 412.85
Sales Revenue
894,368.19
16 | P a g e
18. Second Quarter
Region Products Units Sold Cost per Unit Profit Price Per Unit Earnings Total Operating Costs Account Recv Cash Sales
North East Unit Sales Car Units 708 62.39 97.59 159.98 69,092.16 44,173.68 205.32 49,055.44
Technology 567 19.50 30.49 49.99 17,290.04 11,054.29 164.43 12,275.93
Consumer goods 567 15.60 24.39 39.99 13,831.34 8,842.99 164.43 9,820.25
118018699.1 Total 1842 97.48 152.48 249.96 100,213.55 64,070.96 534.18 71,151.62
East Car Units 826 58.50 91.49 149.99 75,573.96 48,317.78 239.54 53,657.51
Technology 661 11.70 18.29 29.99 12,092.27 7,731.12 191.69 8,585.51
Consumer goods 441 11.70 18.29 29.99 8,067.61 5,157.98 204 4,335.65
Total East 1928 81.89 128.08 209.97 95,733.84 61,206.88 635.23 66,578.68
South East Car Units 811 62.39 97.59 159.98 79,143.71 50,600.07 235.19 56,192.03
Technology 648 15.60 24.39 39.99 15,807.25 10,106.27 187.92 11,223.15
Consumer goods 432 15.60 24.39 39.99 10,538.16 6,737.52 125.28 7,482.10
Total 1891 93.58 146.38 239.96 105,489.12 67,443.86 548.39 74897.27364
Midwest Car Units 748 62.39 97.59 159.98 72,995.67 46,669.37 216.92 51,826.93
Technology 598 15.60 24.39 39.99 14,587.55 9,326.47 173.42 10,357.16
Consumer goods 359 15.60 24.39 39.99 8,757.41 5,599.00 104.11 6,217.76
Total 1705 93.58 146.38 239.96 96,340.64 61,594.83 494.45 68401.85206
Southwest Car Units 763 58.50 91.49 149.99 69,809.85 44,632.52 221.27 49,564.99
Technology 633 19.50 30.49 49.99 19,302.64 12,341.03 183.57 13,704.87
Consumer goods 407 15.60 24.39 39.99 9,928.32 6,347.61 118.03 7,049.11
Total 1040 35.09 54.89 239.97 99,040.80 63,321.17 522.87 70,318.97
West Car Units 866 66.30 103.69 169.99 89,798.92 57,412.42 251.14 63,757.23
Technology 693 19.50 30.49 49.99 21,132.27 13,510.80 200.97 15,003.91
Consumer goods 642 15.60 24.39 39.99 15,660.88 10,012.70 186.18 11,119.23
Total 2201 101.3883 158.58 259.97 126,592.07 80,935.92 638.29 89,880.37
In the second quarter most regions experience positive growth in sales selling on average
1728.33 units with the West Region reaching 2, 201.00 units sold and becoming the
benchmark for future sales with an average price of 86.65 per unit comparable to the
company average of 79.99 unit price. The second quarter results are an average growth of
14.51 percent, exceeding first quarter sales by 1,019 units sold. Total Growth for the
company in the second quarter was 14.95 percent with a standard deviation of 13.01 percent
indicating not only the distribution of units sold but also the reliability of future sales.
17 | P a g e
19. Third Quarter
2500
2000
Car Units
1500
Technology
1000 Services
500 All Products
0
Third quarter results were just above 10,330 units with an average of 1721.83 units sold. The west
region exceeded expectations again with 2064 units sold a 6 percent decrease in growth from the
previous quarter. Comparable quarter results the company growth declined 3.89 percent and the
current growth rate is 10 percent. Technology is up 12.12 percent in the west and services are up
6.69 percent in the Midwest.
JULY 23, 2010 TO SEPT 23, 2010 (10747 UNITS SOLD79.99/9.65 UNIT)
Cash 352,457
Account Receivables including operating costs 507,194
Sales Revenue 859,652.53
Costs of Goods Sold 118,971.53
Inventory 118,971.53
18 | P a g e
20. Fourth Quarter
7000.00
6000.00
5000.00
EBIT 579,301.66
4000.00 Car Units
Account Rcv 169,527.77
3000.00 Technology
Sales 830136.22
2000.00 Services
Total Operating Profit Margin
1000.00
0.00 69.78
In the fourth quarter the company experience a slight decline in sales just at 10, 378 unit sales with
earnings before interest and taxes of 579, 301. The average amount of units sold is 1729.67 with a
standard deviation of 1904.00 units. The west region was above average at 1904.00 units.
Comparable quarter results sales are down 3.63 percent.
SEPT 23, DECEMBER 23 (10378/9.65 UNIT)
Cash 41060.56
AR 59087.14
Sales Revenue 830,136.22
Salary Expense-Operating Expenses 914,352.30
Cash 914,352.30
(120,000 Market value
Depreciation Expense 120,000
Cash 120,000
RECEIPT OF DIVIDENDS FOR STOCK A
Cash 5,000
Investment in Stock A 5,000
19 | P a g e
21. Year Ending December 2010 Region Results
All Regions All Regions
17500
17000
16890
16500
16200
16000
15500 15458
15000 15052
14500
14000
Quarter 1 Quarter 2 Quarter 3 Quarter 4
MANAGEMENT MEETING AND ANALYSIS OF SALES
The second quarter experience the largest growth of 14.95 percent reaching 16890 units and the
west region reached a total of 2201 sales. Since the start of the company, sales are declining by
approx. 4 percent. Management projects that in 2011 the company can reach a growth rate of 10
percent from 2010 to 2011.
20 | P a g e
23. Add
The company acquired a 25 percent stake in XYZ Company gaining 25 percent of their net income. XYZ
Company is a North America Transportation Company who specialized in commercial fleets and rentals.
Management plans in 2011 to expand and utilized their relationship with XYZ to gain economies of scale
and costs efficiency. The company also, extended their stock portfolio and purchase additional
inventory. The company in 2012 plans to issue 200,000 shares of stock to support future growth and
expansion.
2012 – Increase Sales, Spending, Financing and Inventory
2014 – Expansion Project
2015 – Replacement Project
MARKETABLE SECURITIES INVESTMENTS
Purchase a bond for 10,000 with a fair value of 9,000
Investment in Bond A 10,000
Investment in Maturity Debt Securities 10,000
Investment in Stock Portfolio B 72,000
Cash 72,000
PURCHASE 25 PERCENT STAKE XYZ COMPANY
Purchase 300,000 shares for 5 150,000
Cash 150,000
Costs of goods sold 107,896.65
Inventory 107,896.65
Cash 327,677.23
Account Receivable 327,677.23
PURCHASE INVENTORY AND COLLECTED RECEIVABLES
Inventory 204,531.75
Cash 204,531.75
Cash
2011 AFN Budget and 5 Year targets
307,194.99
Account Receivable 307,194.99
22 | P a g e
24. Cash Flow per share 1.58
Performance Target
2010 Actual Scenerio 1 Scenerio 2 Scenario
EPS $1.73 $3.22 $5.60 $1.46
Year-end stock price $13.88 $25.79 $70.00 $13.14
Profit margin (PM) 15.35% 3.66% 6.36% 11.24%
Sales/Assets (Assets turnover) 0.98 1.82 1.98 1.21
Assets/Equity 1.58 2.01 1.74 2.68
ROE 15.0% 13.4% 21.9% 36.4%
Operating costs/Sales 39.0% 92.0% 87.5% 50.5%
L/A:Debt ratio 0.0% 50.2% 42.5% 57.8%
TIE ratio 1.72 4.22 6.60 1.61
For 2011, the company target EPS is 1.46 resulting from an increase in operating assets to support a
sales growth of 15 percent leading to a slight decrease in the stock price. To support the increase in
operations the company plans to extend their debt ratio, and reduce the amount of cash on hand to 5.3
percent of sales. Receivables are currently 29.5 percent of sales and management is requesting for a
decrease of 4 percent. To support increase in growth the company require additional funds of 607, 587
million, reduce to 140,771 million by deducting retained earnings from 2010 of 466,816 million. This
includes an increase in inventory by 14 percent, and an increase in assets by 7 percent to support an
expansion project and upgrades to machinery.
%
o
2010 Actual % of Sales Factors f Forecast 2011 Forecast 2012 Forecast 2013 Forecast 2014 Forecast 2015
2010 Income Statement -$335,544.3 -$335,543.3 -$335,542.3 -$335,541.3 -$335,540.3
Sales $3,390,776.1 15.00% (1 + Factor) × 2010 Sales
$3,899,392.52 $4,484,301.39 $5,156,946.60 $5,930,488.59 $6,820,061.88
Total operating costs 1,323,415.8 50.5% Factor × Forecasted Sales
1,969,193.22 2,264,572.20 2,604,258.03 2,994,896.74 3,444,131.25
EBIT $2,067,360.3 $1,930,199.29 $2,219,729.19 $2,552,688.57 $2,935,591.85 $3,375,930.63
Interest charges 1,200,000.0 10.0% Carry over 2010 amount
1,200,000.00 0.10 0.00 1,200,000.00
Earnings before taxes (EBT) $867,360.3 $730,199.29 $2,219,729.09 $2,552,688.57 $2,935,591.85 $2,175,930.63
Taxes 346,944.1 40% Tax rate × 2011 EBT 292,079.72 887,891.64 1,021,075.43 1,174,236.74 870,372.25
Net income for common (NI) $520,416.2 $438,119.58 $1,331,837.45 $1,531,613.14 $1,761,355.11 $1,305,558.38
Dividends (DIVs) $50,348.3 0.0% $0.00 $0.00 $0.00 $0.00 $0.00
Add. to ret. earns (NI – DIVs) $470,067.9 $438,119.58 $1,331,837.45 $1,531,613.14 $1,761,355.11 $1,305,558.38
Shares outstanding 300,000.000 300,000.000 300,000.000 300,000.000 300,000.000 300,000.000
EPS $1.73 $1.46 $4.44 $5.11 5.871183705 $4.35
DPS $0.17 $0.00 $0.00 $0.00 $0.00 $0.00
Stock Price $13.88 9.0 $13.14 $39.96 $45.95 $52.84 $39.17
Additional Assets $ 607,587.97
Additional Funds Needed $ 140,771.79
23 | P a g e
25. Forecasted Balance Sheet
Innovation 2011 2012 2013 2014 2015
Balance Sheet 2010 Forecast Forecast Forecast Forecast Forecast
Assets
Cash $3,671,348 # $206,667.8 $237,668.0 $273,318.2 $314,315.9 $361,463.3
Accounts receivable 1,000,000 # 949,128.4 1,091,497.6 1,255,222.2 1,443,505.6 1,660,031.4
Inventories 204,532 # 779,878.5 896,860.3 1,031,389.3 1,186,097.7 1,364,012.4
Total current assets $4,875,880 $1,935,674.7 $2,226,025.9 $2,559,929.7 $2,943,919.2 $3,385,507.1
Net fixed assets 600,000 # 1,582,436.1 1,121,075.3 1,289,236.7 1,482,622.1 1,705,015.5
Total assets $5,475,880 $3,518,110.8 $3,347,101.2 $3,849,166.4 $4,426,541.3 $5,090,522.5
Claims on Assets
Accts payable and accruals $804,532 # $2,339,635.5 $2,690,580.8 $3,094,168.0 $3,558,293.2 $4,092,037.1
Notes payable: Original 804,532 -1,941,631.3 0.0
Notes payable: New 607,588 -471,484.0 -1,803,439.3 -786,250.2 -792,564,273.9
Total current liabs $1,868,151.5 $887,141.6 $366,286.5 $3,558,293.2 -$788,472,236.8
Long-term debt 0 0.0 0.0 0.0
Total liabilities $0 $1,868,151.5 $887,141.6 $366,286.5 $3,558,293.2 -$788,472,236.8
Common stock 3,000,000 300,000.0 300,000.0 300,000.0 300,000.0 300,000.0
Retained earnings 466,816 2010 + Add'n to RE from Income Statement
904,935.8 1,769,957.0 2,863,450.6 3,292,968.3 3,066,913.5
Total common equity $3,466,816 $1,204,935.8 $2,069,957.0 $3,163,450.6 $3,592,968.3 $3,366,913.5
Total Claims $3,466,816 $3,073,087.3 $2,957,098.6 $3,529,737.1 $7,151,261.4 -$785,105,323.3
The self-supporting growth rate is 9.7 percent meaning, this is the growth the company can obtain
without raising additional capital. The company 5 year target is to grow by 15 percent a year from their
current projected 10 percent growth from 2010. To obtain the results the company will obtain
additional capital to increase sales by focusing on receivable collections, inventory management, and a
marketing campaign to target the early adopters to late majority.
Supporting Rate 9.72%
24 | P a g e
26. Expansion
Thumbs Up Corporation is considering expanding globally in South America and India. Currently, their
products are manufactured in china and the assembled in the United States. One expansion project will
include a small manufacturing and large assembly plant in India where products will be shipped and sold
to outlets in Europe, Mideast, and Asia. Another project is opening a manufacturing and assembly plant
in South America. With rising oil price and increasing transportation costs, thumbs up corporation hope
to utilized more manufacturing resources at home and in south America however at this time the
company must rely on china to manufacture more than 85 percent of their materials and reap the
benefits of reduce labor costs. Considering the Chinese economics the company does not plan to
assemble and sale any products out of china.
The India project will require a total investment of 880,000 which includes equipment, buildings, sales
outlets, and goodwill funds to lock in contract negotiations. The internal rate of return is projected to
be 35 percent and 7 percent reinvestment of cash flows. The average price across all regions is projected
to be 69.99 and variable costs of 21 per unit.
Pakistan Transportation Contract
Pakistan have a huge influence in the middle east and transporting final goods and materials with
Pakistan assistance could cut transportation costs and provide an influence into the middle eastern
market. The company will be seeking to lock in a transportation contract with Pakistan.
25 | P a g e
27. India Project
India Project Squared
Deviation
Sales Unit Variable Times
Scenario Probability Price Sales Costs NPV Probability
Best Case 25% $89.99 42,000 $18.00 $4,077,665 1019416
Base Case 50% $79.99 26,000 $20.00 $311,181 155590
Worst Case 25% $59.99 800 $25.00 ($4,210,027) (1052507)
122500
Expected NPV = sum, prob times NPV 122,500
Standard Deviation = Sq Root of column H sum 350
Coefficient of Variation = Std Dev / Expected NPV 0
After reviewing the India Project, Thumbs up corporation excluded the worst case scenario and decided
to select the base case with a 50 percent probability of success. The first year of sales is projected to be
26,000 units with a Net present value of 311,181. The payback period for their investment is two years
with an internal rate of return of 35 percent.
Licensing Patent
Thumbs Up Corporation will be licensing their patents to businesses in the area where they are unable
to sell their products
26 | P a g e
28. India Project
Investment Expansion Project India NPV = $1,083,629 Equipment cost $120,000 Outlets 480,000
Equipment ($880,000) Key Output: IRR = 74.8% Building Costs 220,000
All Regions MIRR = 37.7% Goodwill contract funds 60000
Operating Cash Flows over the Project's Life: 2011 2012 2013 2014 2015 2016 2017
Europe Sales 3,000 3,330 5,000 5,550 5,000 5,550 5,000
Middle East 4,000 4,440 5,000 5,550 5,000 5,550 5,000
China 10,000 11,100 10,000 11,100 10,000 11,100 10,000
Japan 5,000 5,550 1,000 1,110 1,000 1,110 1,000
South Korea 4,000 4,440 1,000 1,110 1,000 1,110 1,000
Units sold 26,000 28,860 32,035 35,558 39,470 43,812 48,631
Sales price $79.99 $82.39 $84.86 $87.41 $90.03 $92.73 $95.51
Variable costs $20.00 $20.60 $21.22 $21.85 $22.51 $23.19 $23.88
Sales revenue $2,079,740 $2,377,767 $2,718,501 $3,108,062 $3,553,447 $4,062,656 $4,644,835
Variable costs 84,600.00 87,138.00 89,752.14 92,444.70 95,218.05 98,074.59 101,016.82
Nonvariable operating costs 2,119,500 2,183,085 2,248,578 2,316,035 2,316,035 2,316,035 2,316,035
Depreciation (equipment) 168,000 268,800 159,600 100,800 697,200 0 0
Oper. income before taxes (EBIT) ($292,360.00) ($161,256.26) $220,571.03 $598,782.29 $444,994.21 $1,648,546.65 $2,227,783.03
Taxes on operating income (40%) (116,944) (64,503) 88,228 239,513 177,998 659,419 891,113
After-tax operating income ($175,416) ($96,754) $132,343 $359,269 $266,997 $989,128 $1,336,670
Add back depreciation 168,000 268,800 159,600 100,800 697,200 0 0
Operating cash flow ($7,416) $172,046 $291,943 $460,069 $964,197 $989,128 $1,336,670
Terminal Year Cash Flows:
Required level of net working capital $103,987.00 $118,888 $135,925 $155,403 $177,672 $203,133 $232,242
Required investment in NWC $96,571 $290,935 $427,868 $615,472 $1,141,869 $1,192,261 $1,568,912
Terminal Year Cash Flows:
Net salvage value 279,320 0
Net Cash Flow (Time line of cash flows) ($880,000) $193,142 $581,869 $855,735 $1,230,945 $2,283,738 $2,384,522 $3,137,823
Payback (See calculation below) 2.30 3
Data for Payback Years 0 1 2 3 4 5 6 7
Net cash flow (880,000) 193,142 581,869 855,735 1,230,945 2,283,738 2,384,522 3,137,823
Cumulative CF 0 (686,858) (104,989) 750,746 1,981,691 4,265,429 6,649,951 9,787,774
Part of year required for payback 1.28
27 | P a g e
29. South America Project
South America Project
Sales Unit Variable
Scenario Probability Price Sales Costs NPV
Best Case 25% $79.99 30,000 $19.00 $3,713,104
Base Case 50% $69.99 9,000 $25.00 $409,816
W orst Case 25% $49.99 200 $31.00 ($576,089)
Expected NPV = sum, prob times NPV $989,161.72
Standard Deviation = Sq Root of column H sum $994.57
Coefficient of Variation = Std Dev / Expected NPV 0.00
Thumbs Up Corporation has chosen to accept the Base Case Scenario yielding a net present value of
409, 816 with a 50 percent probability of success. The average Unit price is 69.99 per unit and the
company expects sales to reach about 700,000 in the first year.
Licensing Patent
Thumbs Up Corporation will be licensing their patents to businesses operating in some regions.
South America Project
28 | P a g e
30. Investment Expansion Project South America NPV = $529,748 Equipment cost $120,000
Equipment ($120,000) Key Output: IRR = 128.6%
All Regions MIRR = 73.0%
Operating Cash Flows over the Project's Life: 2011 2012 2013 2014 2015 2016 2017
Units sold 9,000 9,990 11,089 12,309 13,663 15,166 16,834
Sales price $69.99 $72.09 $74.25 $76.48 $78.77 $81.14 $83.57
Variable costs $9.00 $10.04 $10.34 $10.65 $10.97 $11.30 $11.64
Sales revenue $629,910 $720,176 $823,377 $941,367 $1,076,265 $1,230,494 $1,406,824
Variable costs 381,510.00 425,701.58 438,472.62 451,626.80 465,175.60 479,130.87 493,504.80
Nonvariable operating costs 225,000 231,750 238,703 245,864 245,864 245,864 245,864
Depreciation (equipment) 24,000 38,400 22,800 14,400 99,600 0 0
Oper. income before taxes (EBIT) ($600.00) $24,324.53 $123,402.22 $229,476.94 $265,626.07 $505,499.61 $667,455.48
Taxes on operating income (40%) (240) 9,730 49,361 91,791 106,250 202,200 266,982
After-tax operating income ($360) $14,595 $74,041 $137,686 $159,376 $303,300 $400,473
Add back depreciation 24,000 38,400 22,800 14,400 99,600 0 0
Operating cash flow $23,640 $52,995 $96,841 $152,086 $258,976 $303,300 $400,473
Terminal Year Cash Flows:
Required level of net working capital $31,495.50 $36,009 $41,169 $47,068 $53,813 $61,525 $70,341
Required investment in NWC $55,136 $89,004 $138,010 $199,155 $312,789 $364,824 $470,814
Terminal Year Cash Flows:
Net salvage value 335,320 0
Net Cash Flow (Time line of cash flows) ($120,000) $110,271 $178,007 $276,020 $398,309 $625,578 $729,649 $941,629
Payback (See calculation below) (441.80) 3
Data for Payback Years 0 1 2 3 4 5 6 7
Net cash flow (120,000) 110,271 178,007 276,020 398,309 625,578 729,649 941,629
Cumulative CF 0 (9,729) 168,278 444,298 842,607 1,468,185 2,197,834 3,139,463
Part of year required for payback 12.33
29 | P a g e
