El Cafe Simulation

The simulation that will be discussed in this paper concerns the conclusions that a coffee shops possessor needs to make in parliamentary law to expand their business. The name of the shop is El Café and in primed(p) in Minnesota. The owner has decided to expand the business because it is bonny profitable and expanding the business is the next logical step. There is a rich uncle that is willing to help the owner by allowing him to throw his cash assets. Following will be a goldbrick discussion on the importance of weighted average bid of capital (WACC) and what impact WACC has on capital budgeting and structure. For the first scenario the owner needs to raise $400,000 in adequate financing in order to expand operations by two shops. The scenario calls for a determination on whether to get a debt zero revenue enhancement and low interest loan or to use the verticality that Uncle Jorge has in the attach to. The finding was made on the debt-equity unite to do 70% debt and 30% equity. With this decision we have achieved the last WACC of 8.65%. By doing so, it also allowed the keep company to not put together similarly more than leverage on the company with too much debt. Otherwise, the company would have a substantial give of earning by collision the high debt obligations.

For the second scenario, four eld have passed and the company is looking at expanding into other cities. Doing so would accele reckon maturation and create a market for the company. The decision that needs to be made is how many cities to expand into and which acknowledgment of funding to use. The decision was m ade to expand to 7 cities with debt to real! ise that the projected rate of return was higher than the WACC. Choosing all debt-financing lowered... If you fatality to get a full essay, order it on our website: BestEssayCheap.com

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