Essay about Gone Rural Case Write Up
1. How would you advise Ms. Thorne concerning growing her organization, being financially viable and achieving her mission?
In order to grow her organization, our group advises that Ms. Thorne invest a total of R1 million in new additional facilities to double the operating capacity of the company. In order to grow the company and expand into foreign markets, the company needs to build another facility. It was made clear that the limiting factor in production is not the number of people, rather it is the fact that the old facilities have been outgrown. The way our group advises funding the building would be through debt. Using equity to finance the deal would likely mean giving up part of the company …show more content…
4. Determine sustainable growth rate (based on 2010 results)
Sustainable growth rate = ROE (year 2010) x (1 - dividend payout ratio) = 156000/108600 = 14.4%
5. Create 5 year projected income statements and critical balance sheet items. You may make assumptions to create these financial statements. State and justify your assumptions.
Assumptions: (In question 1)
$1M goes straight to PP&E, and is then amortized over 10 years at 2.5% interest rate
No Prepaid/Deferred Taxes, Bank Overdraft, Car Loan, or Other Liabilities
$1M loan is accounted for in L+SE under ‘Shareholder Loans’
6. Does the capital structure impact the growth and