Aunty May. Aunty May has taken a loan from the bank to start a new business. She expects a first-year revenue of $50,000 and, thereafter, revenue growing at 8% per year. Her non-loan expenses are initially $30,000 per year and this grows at 4% per year. Her loan repayment is $25,000 per year for 5 years.
a. Construct a spreadsheet model to examine Aunt May’s business financials.
b. Is the business viable within the first 8 years? When does it break even?
c. Do you think the loan amount is sufficient for overcoming cash flow concerns? How do you know??
d. What if the first-year revenue is $45,000, growing at 7%; the first-year expense is $25,000, growing at 3%; and the loan repayment is $20,000 per year for 5 years.
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