Elements of Slide Show MA 664 May 2007

Introduction Team name Listing of roles played team members Nature of product(s) to be produced by the startup business Nature of industry Product market Input markets Enterprise budget. This budget should define assumptions made for quantities and prices for the first year

Master Budget Sales budget Production budget Direct materials budget Direct labor budget Overhead budget

Cash Budget Sources and uses of cash from operations Financing of capital expenditure Cash management Minimize cash balances by paying down LOC Invest in near cash assets when possible Implications for cash flow liquidity Implications for credit liquidity Implications for asset liquidity

Price Projections State assumptions about the growth of production and input requirements over the 2008-2012 period State procedure and assumptions used to project the price of the firm’s product(s) over the 2008-2012 time period State procedures and assumptions used to project the unit input costs for direct materials, direct labor and overhead

Description of Scenarios Baseline or “Most likely” scenario probabilities over the 2008-2012 period “Optimistic” scenario coefficients of variation, standard deviations and probabilities over the 2008-2012 period “Pessimistic” scenario coefficients of variation, standard deviations and probabilities over the 2008-2012 period

Financial Feasibility Implications for liquidity Implications for solvency and leverage Implications for profitability, including margin Implications for economic efficiency, including turnover Implications for debt repayment capacity Use of bar charts and graphs encouraged

Economic Feasibility Aversion to risk for a given return Elements of NPV calculation Annual net cash flows Risk adjusted discount rates Terminal value in 2012 Discounted net cash flows and terminal value Net cost of project NPV

What could go Wrong? Political risk Global market developments Abnormal weather/environmental change Other unexpected events affecting prices, sales, unit input costs, input availability

Conclusion Would you make this investment? From an economic perspective From a financial perspective Other rationale (e.g., portfolio perspective) What will you watch after the investment is made? Importance of terminal value to your evaluation?

Requirements Assume you are trying to convince me to extend you a5-year LOC for $250,000 You have 30 minutes to do this (nor more than 35 minutes or less than 25 minutes) Do not read from note card!!!! It shows me you do not know your subject Be prepared to answer questions from me and the audience