Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com.

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Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com ShareholdersDirectors

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Mismanagement Claim DirectorsShareholders Business Judgment Rule Presumptions  Informed  Rational Business Purpose  Disinterested  Independently Made

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 1 Capital/Cash Flow Income Capital Contribution (50,000) 0 Gross Receipts 100, ,000 Expenses (40,000) (40,000) Net 10,000 60,000 Cash Flow

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 2 Capital Income Capital Contribution (50,000) 0 Gross Receipts 100, ,000 Expenses (40,000) (40,000) Depreciation (8,000) Net 10,000 52,000 Cash Flow

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 3 Capital Income Capital Contribution (50,000) 0 Gross Receipts 100, ,000 Expenses (40,000) (40,000) Depreciation (8,000) Capital Opportunity Cost (3,000) (3,000) Net Cash Flow / Income 7,000 49,000

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 4 Capital Income Capital Contribution (50,000) 0 Gross Receipts 100, ,000 Expenses (40,000) (40,000) Depreciation (8,000) Capital Opportunity Cost (3,000) (3,000) Labor Opportunity Cost (70,000) (70,000) Net (63,000) (21,000)

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 5 Year 3 Gross Receipts 530,000 Expenses (405,000) Jane Salary (75,000) Income 50,000

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 6 Year 3 Positive Factors  Leverage Experience/Expertise – Higher Gross per Van  Leverage Higher Economy of Scale - Fixed Costs (i.e. Advertising)  Leverage Labor – Yield Greater Than 50k Paid Each

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 7 Year 3 Return on Equity  Gross Return – 20% (50k / 250k)  Beat 6% CD by 14%  Beat 8% S&P 500 by 12%

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 8 Year 3 200k Bank Debt Leverage Gross Receipts 530,000 Expenses (405,000) Jane Salary (75,000) Interest Expense (15,000) Income 35,000 Yield on 50k capital - 70% (35k / 50k)

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Business Concepts Q - 9 Year 3 Business Value 6X Earnings No Debt Debt Income 50,000 35,000 Going Concern Value (6X) 300, ,000 Return of Capital (250,000) (50,000) Net Dollar Yield 50, ,000