I need help with questions 5 through 10. Could you provide some insight on how I would accomplish answering such questions? They are attached.© BrainMass Inc. brainmass.com December 20, 2018, 10:51 am ad1c9bdddf
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In creating a sufficient business plan with financials, the objective is to present the overall details of the product and projections to achieving the goals as well as the mission of the company. Within the executive summary, the forecast of projection earnings are outlined with the supportive documenting of the senior management team that can effectively lead the organization. The business plan offers a product initiative and projection to meeting targeted sales in a given time period, most often, the first 3-5 years are critical to fully assess the profitability potential of the operations for investors.
Let's take a look at the questions sections from 5 to 10:
V. Financial Analysis
As a business owner, the knowledge of the product fixed costs per unit is the basis for understanding what the break-even amount to reach that is will lead further towards profitability. In the financial analysis, the assessment reflects how much one or more units to be produced actually will cost to deliver to the targeted consumer marketplace. Consider the fixed costs as not directly related to the level of production but a core factor in assessing where the company sales needs to reach, in order, to breaking even and leading towards profitability.
Consider the following on four main points of reference to fully understanding the relevancy to the financial analysis on a new product entry (attached is an example of a diagram):
1. Break-even point of reference provides awareness (target point) to when an investment of a product for the marketplace actually generate a positive return.
Example: The windshield wiper glasses will produce a break-even part when the amount units are at 50 that generate sales of $3000, thus, any preceding units sold will lead towards profitability.
2. Fixed Costs are not directly associated to the level of production just the amount that production will costs to making product, outliers of cost of worked hours, and any other identifiers directly or indirectly impact cost of operations.
Example: The identified fixed costs of windshield wiper glasses include but are not limited to the interest costs, overhead expenses, depreciation on any equipment, and any other costs of operations that rarely change or occur regularly.
3. Variable Costs deals with the direct relating to volume of output that at times include cost of production expenses as in power costs during a specified level of product output.
Example: The variable costs identified in production of windshield wiper glasses presents changes in associated costs relating towards powering the manufacturing plant in the range of $unknown during the summer months of May to July.
4. Total Fixed Costs are not prone to change as the level of production increases in most cases, mainly; the outlier is on the actual product (how complex or depended on large equipment the production takes to complete).
Example: The total fixed costs identified in producing the windshield wiper glasses entails the possibility of using larger equipment to handle the demand for timely delivery to the market.
Keep in mind, the main objective basically knows your costs (fixed, variable and/or total fixed costs) that will outline how many sales incoming is required to reach a break-even point (the moment when the numbers washes out and any future incoming sales and production of the products results in sales exceeds costs due to sales volume).
NPV (Net Present Value Analysis)
Now, the NPV is sufficient in an analysis to the vantage point of relaying how the present state of the company's cash flow to future cash flow advantages that can lead to business continuity. The NPV is reflecting to how the present value of available cash now for investing into the business that in the future value after applied interest entail the actual future money coming into the business.
The company investment of $5,000 and will gain back $5,700 next year with an interest rate at 10%. Thus, the money investing out at $5,000 now to start the business or releasing a new product version equals the PV = -$5,000.00. The money coming in within the 1st year is $5,700, therefore, the PV = $5,700 / (1+ 0.10)1 = $5,700 / 1.10 = $5180.18. The net amount is at the assessment of NPV = $5180.18 - $5000.00 = $180.18 (10% interest on the investment is worth $180.18).
Keep in mind, the amount of investment is now determines how much the range of return in the future, however, the ...
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