Acme Enterprises is run by two college

Acme Enterprises is run by two college graduates that are trying to build a start-up from scratch. The following represents the outgoing and incoming funds for ACME Enterprises. Analyze the outgoing and incoming funds to answer questions a), b) and c).Assume an interest rate of 3% c.s.a for the NPV calculation

 

Outgoing funds: (Expenses)

1) Re-Paying back the face value of a $1,000,000 bond 2 years from the start of the project

2) Paying interest coupons semi annually at 1% c.s.a

3) Salaries of staff of $90,000 payable each month

4) Office expenses of $50,000 payable each month

5) Loan payments on a loan of $800,000 at 2% c.s.a. paid semi-annually to be repaid in full in 2

years

6) Initial start up expenses for building and equipment of $700,000

 

Incoming Funds (Revenues)

1) $1,000,000 bond from investors (referred to it 1) above)

2) $800,000 loan from bank (referred to in 5) above)

3) Revenue from product at $250,000 each half year

 

1. a) A detailed time line of all of the Outgoing funds and Incoming Funds. Use different Colors or

styles to distinguish them (Or use outgoing above the line and Incoming below the line). Make

Time line readable. Show every month and quarter and yearly values clearly.

You make use … notation where repetitions occur

There are 9 Funds in all (6 outgoing 3 incoming). Each properly labelled Fund on time Line

. Funds must be clearly labelled showing all relevant Dates. Annuities must be clearly

labelled and show individual payments. Use arrows to indicate where funds are being valued.

 

1. b) Determine the Net Present Value of the Project at time 0. Use 3% c.s.a for this valuation.

Show details of the fund. Show the value as Incoming funds minus the outgoing funds using

present values of all. Show complete details of all calculations.  Also, show a detailed timeline. Clearly show the value of EACH fund and the corresponding Equation detailing the value of the fund that is determined. Make sure to use each fund and value represented on a timeline with an equation. Make sure to compute the overall value of the incoming and outgoing funds. Also Show equations relating to these totals.

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