Corporate finance: Opening a retail music store

Type :

Term papers

Pages :

9 pages

Format :

.doc

Published date :

05/17/2009

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Summary :

 
 

Table of Contents Corporate finance: Opening a retail music store Table of Contents

 
  1. Introduction
  2. Can one profit from this venture and performing the breakeven analysis
  3. Taking a loan from a bank
  4. The music distributors that sell the CD's
  5. The cash conversion cycle for this business and how one might be able to improve it
  6. Expanding the business
  7. The advantages and disadvantages of issuing bonds instead of shares
    1. Advantages of issuing bonds instead of shares
    2. Disadvantages of issuing bonds
  8. The capital asset pricing model
  9. Conclusion

Abstract

Friends Jane and Elizabeth have decided to open up a retail music store. They will open up a store in a large shopping mall, purchase CDs from the large music distributors, and resell them to the public. Their first decision is to determine if they can profit from this venture, therefore they must perform a Breakeven Analysis. Their monthly rent and utilities are $5,000. They will hire one part-time employee who will earn $1,000 per month. They also will have a small advertising budget of $300 per month for a website, posters, and ads in music magazines. Other miscellaneous operating expenses will be $100 per month. In addition to their own contributions, they also took out a simple loan for $40,000 at a 12% annual interest rate (1% per month). The CDs cost them an average of $12 each, and they will sell them for $20 each. Calculate how many CDs they will need to sell each month in order to Breakeven (have a Net Income of zero)

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