Dear Sir/Madam, I gave a assesment a months ago but did not get good result, it was meduim fair. So this time if I get the same avarage, I can fail. So please advise me, last time I sent u the case...

VENTURE INVESTMENT DECISION ANALYSIS
Infosys Technologies Limited
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VENTURE INVESTMENT
DECISION ANALYSIS
[Type the document subtitle]
Phani
Contents
QUESTION ..................................................................................................................................................... 3
MAIN REPORT ............................................................................................................................................... 4
Problem Statement ................................................................................................................................... 4
Year 1-Monthly Cash Flow Analysis .......................................................................................................... 5
Year 2 to 5-Annual Cash Flow Analysis ..................................................................................................... 5
Break-Even Analysis .................................................................................................................................. 6
Sensitivity Analysis .................................................................................................................................... 6
Discounted Cash Flow Analysis ................................................................................................................. 6
CONCLUSION & RECOMMENDATIONS ......................................................................................................... 7
EXHIBITS ........................................................................................................................................................ 8
Table 1: Year 1-Monthy Cash Flow Analysis ......................................................................................... 8
Table 2: Year 2 to 5 Annual Cash Flows ................................................................................................ 9
Table 3: Sensitivity Analysis .................................................................................................................. 9
Table 4: Discounted Cash Flows .......................................................................................................... 10
REFERENCES ................................................................................................................................................ 11
QUESTION
You have been asked by your 60 year old aunt Rita 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 estimates for some of the analysis. Rita lives in New Jersey and
ecently took early retirement (from a company she joined 35 years ago), and left the company
with a lump sum payment of $300,000. Surprisingly, rather than being depressed by her new
state of independence, she is excitedly contemplating a new career as a retailer of fine chocolate.
She is confident that she can set up a business to import chocolate from Switzerland and sell it in
the USA. Her husband, whom she met at business school, is pleased with her passion for her
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 Aunt Rita you have assembled the following information from her: - SwissChoc SA (owned
y a college friend) is prepared to give her exclusive rights to sell their products in the USA for a
five year period in exchange for an upfront payment; - The products retail in Europe for an
average of CHF 100 per kilogram; - SwissChoc would sell products to Rita at a 50% discount to
their European price (f.o.b.); - SwissChoc would ship to Rita on receipt of payment for each
order; - Rita has found out that air freight from Switzerland via DHL would cost CHF 10 per kg
and that shipment from the factory to her would take three days; - Rita plans to order from
Switzerland every two weeks and intends to maintain a minimum stock of four weeks worth of
sales to ensure that she will be able to supply a suitable range of products to customers; - she will
uy a special refrigerator at a cost of $5,000 to be able to keep the chocolate in good condition,
and has found a small industrial room she can rent nea
y at a cost of $1,250 per month; - Rita
intends to sell by internet only, and is planning to spend $2,000 with a website designer; - She is
not sure what price she will be able to achieve for the chocolates, but is confident that it should
e somewhere between $110 and $150 per kg; - All sales would be by credit card, with the credit
card company taking 2% per sale and remitting the balance to Rita once every month; - Rita
estimates that she will be able to build sales up slowly in the first year, starting at 20kg a week
initially, up to 50kg a week at the end of the year, and continuing at a constant 50kg a week from
the beginning of the second year onwards; - She believes that one person could run the operation
initially and hopes to do so herself, paying a salary of $4,000 per month (including social
charges). From the second year onwards she would also hire an assistant to help at a salary of
$3,000 per month (including social charges); - Rita’s marginal tax rate on investment or earned
income is 30%. Rita believes that she could invest her redundancy lump sum at 5% per annum
after tax, and therefore suggests that you use 5% as the after tax discount rate for a discounted
cash flow analysis.
MAIN REPORT
Problem Statement
The problem at hand requires me to help Rita make a decision on investing the lump sum payment she
has received after 35 years of service. She has two options, whether to invest in a business of selling
chocolates through a website or to invest it at a fixed rate of 5% per annum after tax....