General finance

The following post has two questions namely;

1.General finance

You have been asked by your 60 year old uncle Walt to help him assess a new venture. It is Friday night, and he needs the work finished by Sunday, in preparation for an early Monday morning
meeting, so you know that he will not be able to give you any more information than he already has (and you will be unable to contact him over the weekend), and therefore you may need to rely on
your own assumptions and estimates for some of the analysis. Walt lives in Boston in the USA, and recently took early retirement from a company he joined 30 years ago, leaving the company with a
lump sum (after tax) payment of $450,000. Surprisingly, rather than being depressed by his new state of independence, he is tired of the corporate life and excitedly contemplating a new career as a
retailer of Scottish speciality shortbread biscuits. He is confident that she can set up a business to import the biscuits from Scotland and sell them in the USA. His wife, who she met at business
school, is pleased with his passion for this possible new venture, but concerned that it might turn into a financial disaster. She has suggested that he develop a detailed financial plan to
evaluate the venture and its viability.
After a couple of hours with Walt you have assembled the following information from her: – Loch Pitten Bakeries (LPB), an established supplier of traditional Scottish shortbread close to Inverness,
is prepared to give him exclusive rights to sell their products in the USA for a five year period in exchange for an upfront payment for those rights; – The biscuits sell in the UK for an average
of £18.50 per kilogram (kg), and LPB is prepared to sell them to Walt at a 35% discount to this price; – LPB would ship to Walt on receipt of payment for each order; – Walt has found out that air
freight from LPB via air courier would cost on average £69 for a 25 kg shipment, and that the time from him placing an order to receiving the goods in Boston would be two weeks (including the
preparation and packing time in Scotland); – Walt plans to order from LPB monthly and intends to maintain a minimum stock of four weeks’ worth of sales to ensure that he will be able to supply a
suitable range of products to customers; – He will buy racking and a special temperature controlled cabinet costing $1,350 to store the biscuits, and has found a small industrial room nearby that
he can rent for $275 per month (payable monthly in advance, plus a security deposit of three month’s rent);

– He will buy racking and a special temperature controlled cabinet costing $1,350 to store the biscuits, and has found a small industrial room nearby that he can rent for $275 per month (payable
monthly in advance, plus a security deposit of three month’s rent); – Walt will sell the biscuits by internet only, and is planning to spend $5,500 with a website designer to develop the site; – He
has already spent $4,500 on a market study that told him that once established, demand would be about 1,500 pounds (lb) per month, although in the first year sales would start at only 100 lb 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 in the USA of $17 per pound (ignore any impact of sales
taxes in your calculations); – Packaging and shipping within the USA would average $4/lb per box, and Walt is not currently intending to charge that to the customer; – All internet sales would be
by credit card, with the credit card company taking 1.8% per sale and emitting the monthly total to Walt one week after the end of each calendar month; – He believes that one person could run the
operation at a total monthly cost (including employer’s social charges) of $1,700; – Walt believes that if necessary she could borrow up to an additional $75,000 at 4% p.a.; – Walt’s marginal tax
rate on investment or earned income is 30%, payable one year in arrears; he has also told you that he can invest any available cash at an after-tax 2% per annum. Walt also has a friend, Kelly, who
runs a small chain of travel agents in the Boston area. Kelly is interested in the venture and has agreed that if Walt would pack one half pound of biscuits in gift boxes (with the name of Kelly’s
shop embossed on the box), she would buy fifty such boxes from Walt each month in the first year (which would be in addition to the internet sales outlined above, and would start immediately), at a
price of $11.50 each. To do this Walt would need to buy-in printed card for the boxes costing $2.50 each, and purchase a small electric embossing machine costing $450. He would also hire a student
part-time specifically to assemble and pack the boxes at an additional cost of $150 per month.
Walt remembers lectures on discounted cash flow analysis at business school (although he admits that he did not fully understand them, unlike his wife who was a distinction student). He has asked
you to prepare an analysis while he is away to help himr 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;

2.Aviation Industry Procedures

Complete a 1500 word structured ‘Business Continuity Report’ to explain the management of the recovery of airport business functions following an unpredicted event:
“The unpredicted event is the loss of two (2) x ray machines in the arrivals area of the airport followed by the loss of electrical power across the entire airport.”

Special Conditions:
1. There is no spare x-ray machines
2. Electrical contractors have replaced the wiring but made a mistake with the main electrical input to the airport. The repair to wiring will take approx. 4-6 hours
3. You need to solve the problem to ensure passenger safety and airport security