Description
Manufacturing is the production of goods for use or sale using labor and machines, tools, chemical and biological processing, or formulation. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale.
Manufacturing Fund Recapitalization Assignment Your assignment is to recommend which option or combination of options the Fund should use to expand its lending capacity. To support your recommendation, project each option’s impact on the Fund’s lending capacity and cash flow. Using the FY2000 cash flow projection and June 30, 2000 projected balance sheet in Tables 18-7 and 18-8, the summary of each option, and the following assumptions, prepare a three-year cash flow statement, balance sheet and income statement for FY2001 through FY2003. Base your recommendation on which option allows the Fund to maximize its lending capacity while funding $1.2 million in operating expenses and maintaining a minimum cash balance of $650,000. However, consider other factors as well, such as which transaction leaves the Fund in the best financial condition, potential downside risks to the Fund and the impact on the Fund’s capacity to raise additional capital in the future. To simply the analysis, assume that the Fund receives the full proceeds of each transaction without paying legal fees or other costs. Use the following assumptions to prepare a baseline projection without new capital and scenarios for the competing alternatives: ? ? ? ? Legislative appropriations continue at $600,000 annually The average interest rate on the Fund’s loans is 11% (prime plus 2.5%) Interest earned on cash averages 5.5% Loan repayments are made with equal principal payments and an average amortization period of 30 months, i.e. 1/30 of the loan principal is repaid each month. ? ? ? A 3% fee is paid for each new loan at closing. Operating expenses grow by 4% annually The Fund maintains a minimum cash balance of $650,000
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Annual loan losses equal 5% of loans receivable. The Fund has a $1 million backlog of loans to fund. Cash proceeds raised above $1 million are disbursed for new loans at a maximum rate of $1.5 million per quarter.
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Each funding option occurs at the end of FY2000.
Prepare a brief memo presenting your recommendation and why is the Fund’s best option. Attach pro forma financial statements that show the impact of each option on the Fund's cash flow and lending capacity.
doc_536089473.pdf
Manufacturing is the production of goods for use or sale using labor and machines, tools, chemical and biological processing, or formulation. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale.
Manufacturing Fund Recapitalization Assignment Your assignment is to recommend which option or combination of options the Fund should use to expand its lending capacity. To support your recommendation, project each option’s impact on the Fund’s lending capacity and cash flow. Using the FY2000 cash flow projection and June 30, 2000 projected balance sheet in Tables 18-7 and 18-8, the summary of each option, and the following assumptions, prepare a three-year cash flow statement, balance sheet and income statement for FY2001 through FY2003. Base your recommendation on which option allows the Fund to maximize its lending capacity while funding $1.2 million in operating expenses and maintaining a minimum cash balance of $650,000. However, consider other factors as well, such as which transaction leaves the Fund in the best financial condition, potential downside risks to the Fund and the impact on the Fund’s capacity to raise additional capital in the future. To simply the analysis, assume that the Fund receives the full proceeds of each transaction without paying legal fees or other costs. Use the following assumptions to prepare a baseline projection without new capital and scenarios for the competing alternatives: ? ? ? ? Legislative appropriations continue at $600,000 annually The average interest rate on the Fund’s loans is 11% (prime plus 2.5%) Interest earned on cash averages 5.5% Loan repayments are made with equal principal payments and an average amortization period of 30 months, i.e. 1/30 of the loan principal is repaid each month. ? ? ? A 3% fee is paid for each new loan at closing. Operating expenses grow by 4% annually The Fund maintains a minimum cash balance of $650,000
? ?
Annual loan losses equal 5% of loans receivable. The Fund has a $1 million backlog of loans to fund. Cash proceeds raised above $1 million are disbursed for new loans at a maximum rate of $1.5 million per quarter.
?
Each funding option occurs at the end of FY2000.
Prepare a brief memo presenting your recommendation and why is the Fund’s best option. Attach pro forma financial statements that show the impact of each option on the Fund's cash flow and lending capacity.
doc_536089473.pdf