U4-1. If you were in Jimmie’s shoes, would you sell Greg an equity stake in Lee’s Ice Cream? Explain. If
Jimmie does sell equity to Greg for $3,300, what percentage of the business should he offer?
If I were in Jimmie’
...
U4-1. If you were in Jimmie’s shoes, would you sell Greg an equity stake in Lee’s Ice Cream? Explain. If
Jimmie does sell equity to Greg for $3,300, what percentage of the business should he offer?
If I were in Jimmie’s shoes I would sell Greg an equity stake in Lee’s ice cream because at a minimum I
would have to give him 24% of equity stake and that is only a small portion of my profits. Also, I could
always buy them out when I have enough funds.
U4-2. Assume that Jimmie rejects Greg’s offer. Brainstorm and list three other financing strategies for
Jimmie to investigate.
Rent equipment instead of buying.
Now that the loan is lower, Jimmie might be able to get a loan from the bank.
Talk to more friends about the business and see if any of them are willing to invest on the
business.
U4-3. Jimmie’s mother agreed to loan him $3,000 at 8 percent interest. Calculate the total amount
Jimmie will owe his mother:
Jimmie owes his mother $3,132
U4-4. Jimmie will sell his ice cream cones for $2 each. Assume the following about Jimmie’s cost of
goods sold for one ice cream cone:
Soft serve ice cream: $0.20
Ice cream cone: $0.05
Napkin: $0.02
Topping: $0.03
a. What is the total COGS for one ice cream cone?
The total COGS for one ice cream is $0.30
b. What is Jimmie’s gross profit per unit?
Jimmie’s gross profit per unit is $2.7
U4-5. Jimmie believes he can sell an average of 150 ice cream cones per day at $2 per cone. Jimmie
operates his business 7 days per week between May and August, for a total of 123 days. Calculate the
following:
a. How many ice cream cones would Jimmie sell in total?
He would sell 18,450 ice cream cones in total.
b. What would Jimmie’s total revenue be?
His total revenue would be $36,900
c. What would be Jimmie’s total COGS?
His total COGS would be $5,535
d. Calculate Jimmie’s gross profit.
Jimmie’s gross profit would be $31,365
e. Assume that Jimmie’s total monthly operating costs are $1,500. His business operates for four
months of the year. Calculate his total net profit for one year of business operations.
He would have a net profit of $29,865 for one year of business operations
f. Create a projected income statement for the period from May 1 until August 31, 2012.
Remember to include the interest to his mother for the four months and taxes at 25%. Assume
that there is no depreciation or operating costs other than those described in the case study.
Lee’s Ice Cream
Income Statement for the period from May 1 until August 31, 2012
Sales: $36,900
Cost of Goods Sold:
Materials $5,535
Total COGS: $5,535
Gross Profit: $31,365
Fixed Operating Costs:
Loan payment $3,132
Administrative $1,500
Total Fixed Operating Costs: $4,632
Profit Before Taxes: $26,733
Taxes (25%): $6,683.25
Net Profit: $20,049.7
5
[Show More]
