A Break Even Analysis

You have been asked by your 65 year old aunt Hattie to help her assess a new venture. It is Friday night, and she needs the work finished by Sunday, in preparation for an early Monday morning meeting, so you know that she will not be able to give you any more information than she already has (and you will be unable to contact her over the weekend), and therefore you may need to rely on your own assumptions and estimates for some of the analysis where appropriate.
Hattie lives near Manchester, England, and recently took early retirement (from a university she joined 30 years ago), leaving them with a lump sum (after tax) payment of £450,000. Surprisingly, rather than being depressed by her new state of independence, she is tired of the bureaucratic life and excitedly contemplating a new career as a retailer of geodes1 and other decorative stones. She is confident that she can set up a business to import geodes from Uruguay and sell them in Europe. Her husband, who she met in the USA at business school, is pleased with her passion for this possible new venture, but concerned that it might turn into a financial disaster. He has suggested that she develop a financial plan to evaluate the venture and its viability.

After a couple of hours with Hattie you have assembled the following information from her:
– Colada Geodes, an established supplier of geodes and similar stones based in Artigas (and owned by one of Hattie’s university colleagues), is prepared to give her exclusive rights to sell their products in the UK for a six year period in exchange for an upfront payment for those rights;
– The geodes sell in Uruguay for an average of 350 Uruguayan Peso (or $U for short) per kg, and Colada Geodes is prepared to sell them to Hattie at a 45% discount to this price;
– Colada Geodes would ship to Hattie on receipt of payment for each order;
– Hattie has found out that freight from Artigas to Manchester, via Montevideo by truck and air freight, would cost on average $U 200 per kg and that the time from her placing an order to receiving the goods in Manchester would be four weeks (including the preparation and packing time in Uruguay);
– Hattie plans to order from Colada Geodes monthly and intends to maintain a minimum stock of one month’s worth of sales to ensure that she will be able to supply a suitable range of products to customers;
– She will buy a special jig and tools at a cost of £ 3,500 to break open and polish the geodes, and has found a small industrial room she can rent nearby at a cost of £ 300 per month (payable monthly in advance, plus an initial security deposit of three months rent, refundable at the end of her tenancy if there is no damage);
– Hattie will sell the geodes throughout the UK by internet only, and is planning to spend £ 4,000 with a website designer to develop the site;
– She has already spent £ 3,000 on a market study that told her that once established, demand would be about 750 kg a month, although in the first year sales would start at only 50 kg in the first month before building up slowly to the full level at the end of the first year;
– The above study assumed an average selling price of £ 35 per kg (ignore any impact of sales taxes in your calculations);
– Packaging and shipping in the UK would average £ 5.50 per kg, and Hattie is not intending to charge that to the customer;
– All sales would be by credit card, with the credit card company taking 1.2% per sale and remitting the monthly total to Hattie two weeks after the end of each calendar month;
– She believes that two part-time students could run the geode operation at a total cost to her (including employer’s social charges) of £ 1,500 per month;
– Hattie believes that, if necessary, she could borrow up to an additional £ 40,000 at 7% p.a.;
– The effective overall marginal tax rate on profit from a company set up to undertake this activity would be 28%, payable one year in arrears; Hattie has also told you that she can invest any available cash at an after tax 3% per annum.
Hattie also has a friend, Ian, who runs a small chain of gift shops in the Lake District. Ian is interested in the venture and has agreed that if Hattie would mount six different geodes in glass-fronted cabinets for wall mounting, he would buy 6 such cabinets (each containing 1.5 kg of geodes on average) from her per month (which would be in addition to the internet sales outlined above, and would start immediately), at a price of £ 45 (paid immediately) per completed cabinet. To do this Hattie would need to buy-in cabinets and mounting accessories at a cost of £ 7 per cabinet and hire a part-time assistant specifically to assemble the cabinets, at an additional cost (including employer’s social charges) of £ 200 per month. Ian plans to sell the cabinets at £ 75 each.

Don't use plagiarized sources. Get Your Custom Essay on
A Break Even Analysis
Just from $13/Page
Order Essay

Hattie remembers lectures on discounted cash flow analysis at business school (although she admits that she did not fully understand them, unlike her husband who was a distinction student). She has asked you to prepare an analysis while she is away to help her with the decision, making clear any assumptions that you make; the analysis should not exceed a total of 25 pages (everything included), and should include:
– A summary of all assumptions and estimates that you have made for your analysis, including justifications where appropriate;
– A break even analysis;
– A Profit and Loss Statement for the first year of operations and Balance Sheet at the end of the first year;
– Monthly cash flow for the first year of operation;
– Annual cash flow thereafter;
– A clear explanation, in plain English, of how much cash the venture will need to get started;
– Any sensitivity analysis that you think would be helpful;
– The most that Hattie could offer Colada Geodes as an upfront fee for the exclusive rights for the six year period (which does not include any geode purchases) which would leave her no better or worse off than if she had not undertaken the venture, and the amount you suggest she should actually offer them;
– Conclusions and recommendations;
– A critical reflection of the analysis that Hattie has asked you to prepare; how you have evaluated the attractiveness of the venture and what, if anything, would you do differently in a financial analysis of this opportunity, and why?
Hattie has explained that she is going to be out of town for a wedding so will be unable to provide any assistance at all, but as she pointed out before leaving “you will find this easy with computers and the internet to help”.
Your report should demonstrate skills of critical reflection, effective communication and balanced judgement; note that this is not a market report. Scripts that are excessively long (i.e. exceeding the page limit) will not be read beyond the point of the word limit; there is no minimum word limit. Do not put your name on the paper.
The overall structure should be as follows:
1. Cover Page (1 page)
2. Table of Contents/List of Exhibits (1 page)
3. Executive Summary
4. Main Report
5. Critical Reflection
5. List of References.
The data in your answer should be clearly laid out in tabular format so that your approach and answer are both plainly evident. For more information on A Break Even Analysis visit this: https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/businesses-and-occupations/break-even-analysis

A Break Even Analysis

Grab 16% Discount On This Paper
Pages (550 words)
Approximate price: -

Why Choose Us

Quality Papers

ACME Homework provides the best top-grade academic writing services in compliance with our customers’ instructions. Have your paper written by a certified professional online college homework help writer to produce only high-quality essays with zero plagiarism.

Professional Academic Writers

You can now choose from a pool of online college homework help writers. Choose your writer and have them write the best content for you. ACME Homework has, over the years, secured a team of the most reliable, experienced, and qualified writers. You can, therefore, trust that your assignment is in good hands.

Affordable Prices

We know that students have very limited budgets. And for that, we always strive to provide only the best, most affordable online college homework help services to our customers. Our goal is to provide top-quality assignment help services to all customers at the lowest, most affordable prices.

On-Time delivery

At Acmehomework.com, we pay strict attention to deadlines. We recommend you to check out clients’ reviews for assurance that we will complete your assignments within the set deadlines. You can, therefore, trust that your paper will be done within and before the set deadline. Until now, we have not missed a single deadline.

100% Originality

Our Acmehomework.com homework helper experts write only 100% original and plagiarism-free content for all of our clients. We also have a Quality Assurance Department team that goes through all work submitted by our writers multiple times. You can, therefore, rest assured that any signs of plagiarized or unoriginal content will be rejected before it reaches your portal.

Customer Support 24/7

Acmehomework.com expert writers are always available 24/7 for customers who need assistance with using our website. You don’t have to check your watch the next time you want to have your assignment written. Our customer support is always available round the clock and ready to listen to your queries. Feel free to contact us via the Chat window or support email: support@acmehomework.com.

Try it now!

Grab 16% Discount On This Paper

We'll send you the first draft for approval by at
Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

For years now, Acmehomework.com has stood as a leader in providing its customers with the best online college homework help service in the industry. And all you have to do is provide us with the details of your order. Leave everything else to us. We’ve always got you covered.


Essay Writing Services

Since we launched, Acmehomework.com deserved the best online “college homework help status” thanks to our essay ordering, writing, and delivery process. We deliver nothing but excellence in our results. Our essay writing services include impeccable grammar, zero-plagiarism, proper structure, and conformance to guidelines.


Admission and Business Papers

Our top-quality online college homework help services guarantee that you will be accepted into your desired university. You just need to fill out your admission and business papers, and our team of online homework help workers will handle the rest. We will help you achieve and secure the best positions in your admissions forms.


Editing and Proofreading

At Acmehomework.com, we have a skilled writing and editing team that’s dedicated to creating, editing, and restructuring for all types of papers. Our online college homework help editing and proofreading team will check, paraphrase, and correct any grammar mistakes on your paper before submitting the final document to you.


Technical Papers

At Acmehomework.com, we pride ourselves in having writers in almost all fields, even the most technical ones. You never have to worry about your paper being too technical for our certified online college homework help writers to handle. ACME Homework’s team of writers can handle even the most complex writers. We will match your paper to the most competent writer that we believe will handle your paper the best way possible.

                                                                                     Place Order