Entrepreneurial Finance

Running Head : Entrepreneurial finance

Entrepreneurial Decision Making - Financial Case Part A

The financial information presented in the case forms the basis for my recommendation : I would buy this company . The company 's financial position has dipped in the year 2007 but however the composition of the costs of selling and operating the business have favorable ratios that support the decision to buy the company . The net income has dropped from being 25 of net sales in 2005 to 14 of net sales in 2007 however there seems to be great potential

for efficiency in the future of the company

Part B

A conservative discount rate of 15 yields a Net Present Value of 64 ,721 . I would be willing to buy the company for approximately 400 ,000 assuming that the company will grow in future and there will be considerably a growth rate in the range of 10-11 . The amount I am willing to buy consists of the NPV of the net income of the three years plus a perpetuity income assuming that the 2007 net income is used for the growth projections

Part C

One of the major strengths of this company is its large gross profit - its cost of goods sold has been between 28 and 36 of the net sales throughout the three years . This implies a significant contribution margin and potential future growth in net income by cost-cutting strategies focused on operating expenses . The legal expenses are zero in 2007 and there is a 90 reduction...