Hypothetical Business. Essay

Submitted By marp10
Words: 946
Pages: 4

Module 3: Financial Plan to Gain Funds
The Cul-de-sac

In order to expand within five years, The Cul-de-sac, the business needs to invest some of its revenue. The Cul-de-sac has managed to put aside 100,000 dollars aside for investing. The money gained from this endeavor will be spent on four new billiard tables, each averaging around 400 hundred dollars (1). Also, there is need for one air hockey table, which will cost the company around 1,500 dollars (2). In order to fit these new game tables, the business has decided to buy the building adjacent to The Cul-de-sac. Buying the building will cost 75,000 dollars and remodeling will cost the business around 50,000. In order to carry out these expansions, the business will needs to gain at least 39,000 dollars from investing (assuming that stocks are sold at original pricing). In order to make the money that The Cul-de-sac needs to expand, the company has bought several stocks and has taken out a loan with United Services Automobile Association (USAA). First The Cul-de-sac has purchased twenty-five stock in Google (GOOG) at roughly 903 dollars each (3). The total cost for the fifty cost is around 45,150 dollars. According to the NASDAQ stock market, Google opened at 898.39 dollars; which is an increase of .53 percent. Their high today was at 904.13 and their low was at 895.62. In 2009 Google stock was worth 150 dollars and over the years has only increases substantially. In 2010, they were worth 240 dollars. In 2011, 300 dollars and in 2012 they had reached over 400 dollars. And in 2013, Google has made a huge jump to 903 dollars a share (3). Google, so far has not disappointed their stock holders. Which is why The Cul-de-sac has chosen to invest in Google. If the numbers continue rising the way they are, in 2018, Google stock will be worth over 2000 a share. With fifty shares, that will give The Cul-de-sac a 50,000 dollar increase in revenue. With only 54,850 dollars left, The Cul-de-sac chose to invest 9,360 dollars in Apple stock (APPL). This resulted in the business gaining twenty stock, each costing roughly 468 dollars. In 2009, Apple stock was only worth about 150 dollars. But, like Google, Apple has only increased in value over the years. In 2010, Apple increased to 240 dollars and in 2011, they were at 300 dollars. In 2012, Apple jumped to 400. Apple’s peak performance was in 2012/2013 when their stock reached a high of 740 dollars. Now, in 2013, Apple is back down to 478 dollars (3). But because Apple has come out with many successful products and updates, The Cul-de-sac is confident that apple will only add to their revenue. CNN expects Apple to reach an all time high of 777 dollars in 2013. Assuming that this increase holds steady, in 2018, Apple will have reached 1,500 dollars, increasing each stock by 723 dollars. This gives The Cul-de-sac an increase of 14,460 dollars. Lastly, The Cul-de-sac will be taking out a 75,000 dollar loan with USAA for 48 months, or 4 years. USSA has a loan rate of 9.99 percent (4). This means that The Cul-de-sac’s monthly bill will be equal to $1901.83. The Cul-de-sac has 45,490 dollars left, which will be used to help pay back this loan. This money will stretched out over 29 months (2.5 years). The remaining portion of the loan will be paid back from revenue gain at The Cul-de-sac. Taking this loan out will guarantee that the adjacent building can be purchased by The Cul-de-sac. Assuming that the stocks that The Cul-de-sac has purchased will continue to rise as predicted, the company will be taking in a 64,460 dollar profit by 2018. This cover any excess money owed to USAA, the remodeling, the new equipment, and any other renovations that The Cul-de-sac might need. Debt financing was another route that The Cul-de-sac could have taken in investing. Debt financing is when a company sells bonds, bills, or notes to “individual and/or institutional investors”. However, “in…