Assignment 1: Information Interviews
Instructions
Informational Interview (20%), due July 16th.
The information Interviews =two separate interviews: the first involves meeting and interviewing an entrepreneur or business ownerto gather information as to their business experience, strategy, and operations.
The second consists of interviewing a commercial banker or other financial professional, to obtain information
as to the bank loan requirement and approval process, and/or investment requirements and strategy, as well as critical factors needed for a banker or investor presentable business plan.
You should not wait until the due date to prepare, as meetings may be difficult to arrange at short notice. While face-to-face interviews are preferable, if your work schedule inhibits such preparation, you may conduct the interviews by telephone or via online/e-mail format.
Required Elements to include in the Informational Interview Write Up:
Students are responsible for developing questions that will garner the responses necessary to address the key elements of the assignment.
Include all of the following elements in your interview report:
· Provide a brief description of the business which includes the business form the nature of the business, how many years in business, and whether the business is local in nature, national, or international in scope;
· Why did the person decide to go into business, and what was the biggest obstacle they had to overcome in the early stages of the business;
· Did the owner develop a Business Plan before starting the business, why or why not;
· Discuss what makes the business unique and different from its competition and what is its value proposition;
· Does the company have a clearly defined strategy, what do you believe it is;
· Discuss the owners marketing and sales strategy for gaining and maintaining new business opportunities;
· What core business functions if any did the business decide to outsource and why;
· Discuss the hiring process and the core values that have been established for the organization;
· Discuss the financial management tools and metrics that the business owner depends on too manage growth and profitability;
· Discuss keys to success, from the owner's perspective;
· What the person would do differently if he/she had it to do all over again.
· Critically assess the current status of the business based on concepts presented in class. What would you say is the future for this business? Would you invest in this business? Why or why not?
· Interview questions must be included as an addendum to the assignment; however, these should not be counted toward the length requirement of the paper.
·
For the financial report, consisting of an interview with a commercial banker, investor, or financial professional, the content should include discussing the loan origination and approval process if interviewing a banker, or the investor analysis, decision making, and due diligence process if inte ...
Measures of Dispersion and Variability: Range, QD, AD and SD
Assignment 1 Information InterviewsInstructionsInformationa.docx
1. Assignment 1: Information Interviews
Instructions
Informational Interview (20%), due July 16th.
The information Interviews =two separate interviews: the first
involves meeting and interviewing an entrepreneur or business
ownerto gather information as to their business experience,
strategy, and operations.
The second consists of interviewing a commercial banker or
other financial professional, to obtain information
as to the bank loan requirement and approval process, and/or
investment requirements and strategy, as well as critical factors
needed for a banker or investor presentable business plan.
You should not wait until the due date to prepare, as meetings
may be difficult to arrange at short notice. While face-to-face
interviews are preferable, if your work schedule inhibits such
preparation, you may conduct the interviews by telephone or via
online/e-mail format.
Required Elements to include in the Informational Interview
Write Up:
Students are responsible for developing questions that will
garner the responses necessary to address the key elements of
the assignment.
Include all of the following elements in your interview report:
· Provide a brief description of the business which includes the
business form the nature of the business, how many years in
business, and whether the business is local in nature, national,
or international in scope;
· Why did the person decide to go into business, and what was
the biggest obstacle they had to overcome in the early stages of
the business;
· Did the owner develop a Business Plan before starting the
business, why or why not;
· Discuss what makes the business unique and different from its
2. competition and what is its value proposition;
· Does the company have a clearly defined strategy, what do
you believe it is;
· Discuss the owners marketing and sales strategy for gaining
and maintaining new business opportunities;
· What core business functions if any did the business decide to
outsource and why;
· Discuss the hiring process and the core values that have been
established for the organization;
· Discuss the financial management tools and metrics that the
business owner depends on too manage growth and profitability;
· Discuss keys to success, from the owner's perspective;
· What the person would do differently if he/she had it to do all
over again.
· Critically assess the current status of the business based on
concepts presented in class. What would you say is the future
for this business? Would you invest in this business? Why or
why not?
· Interview questions must be included as an addendum to the
assignment; however, these should not be counted toward the
length requirement of the paper.
·
For the financial report, consisting of an interview with a
commercial banker, investor, or financial professional, the
content should include discussing the loan origination and
approval process if interviewing a banker, or the investor
analysis, decision making, and due diligence process if
interviewing an investor or financial professional,
For either banker or investor, also discuss the importance of,
and key material sections of, the business plan for reaching an
approval decision.
· Required Formatting of Informational Interview Report:
· This report should be double spaced, 12-point font, and four
to six pages in length, excluding the title page and reference
page;
· Title page;
3. · Introductory paragraph and a summary paragraph;
· Use headings;
· Write in the third person;
· Use APA formatting for in-text citations and a reference
page. You are expected to paraphrase and not use quotes.
Deductions will be taken when quotes are used and found to be
unnecessary;
· Submit the paper in the Assignment Folder.
Rubric Name: Interview w/Entrepreneur (20%)
Criteria
Outstanding
Superior
Good
Substandard
Failure
Critical Thinking/Reasoning
5 points
demonstrates a high degree of critical thinking, is consistent in
accurately interpreting questions & material; provides solid
assumptions, reasoning & claims; thorough analysis &
evaluation with sound conclusions
4.25 points
shows good critical thinking; accurately interprets most
questions & material; usually identifies relevant
arguments/reasoning/claims; offers good analysis & evaluation
with fairly sound conclusions
4. 3.75 points
shows occasional critical thinking; questions & material is at
times accurately interpreted; arguments/reasoning/claims are
occasionally explained; offers fair analysis & evaluation with a
conclusion
3.25 points
shows little critical thinking, misinterprets questions or
material; ignores or superficially evaluates; justifies little and
seldom explains reasoning; draws unwarranted conclusions
2.75 points
lacks critical thinking consistently offers biased interpretations;
ignores or superficially evaluates; argues using poor reasoning,
and/or unwarranted claims
Application of Concepts/Development
5 points
arguments or positions are well-supported with evidence from
the readings/experience; ideas go beyond the course material
and recognize implication and extensions of the material and
concepts
4.25 points
arguments or positions are mostly supported by evidence from
the readings and course content; ideas presented demonstrate
student’s understanding of the material and concepts
3.75 points
arguments are more often based on opinion or unclear views
than on position grounded in the readings of material or
external sources of material
3.25 points
arguments are frequently illogical and unsubstantiated; student
5. may resort to ad hominem attacks on the author instead of
making meaningful application of the material
2.75 points
arguments lack meaningful explanation or support of ideas
Development of Interview Questions
4 points
questions are logical and effective; enables writer to fully
understand the facets of the entrepreneur's job and the skill sets
involved in carrying out the day to day responsibilities of the
business
3.4 points
questions are somewhat logical but slightly limiting; enables
writer to achieve a degree of understanding but a key facet of
the business or responsibility of the entrepreneur is missing
3 points
questions demonstrate a degree of logic but are very limiting;
hinders writers ability to fully understand the nature of the
business and the scope of the entrepreneur responsibilities
2.6 points
some questions are appropriate but key points are missing;
enables writer to understand either the facets of the business or
the scope of the entrepreneur's responsibilities but not both
2.2 points
questions are irrelevant and fail to draw essential information
Attention to Instructions
3 points
demonstrated full understanding of requirements; responded to
each aspect of assignment
2.55 points
6. demonstrated understanding of requirements; missed one minor
aspect of assignment
2.25 points
demonstrated some understanding of requirements; missed a key
element or two minor aspects of assignment
1.95 points
failed to show a firm understanding of requirement; missed two
key elements or several minor aspects of assignment
1.65 points
did not demonstrate understanding of assignment requirements
Clarity; including grammar
2 points
writing is clear and easy to follow; grammar and spelling are all
correct; formatting gives a professional look and adds to
readability
1.7 points
most ideas are presented clearly; occasional spelling and/or
grammar issues
1.5 points
wordy; some points require rereading to understand fully; more
than an occasional spelling and/or grammar
1.3 points
unclear and difficult to understand; frequent spelling and
grammar issues
1.1 points
largely incomprehensible writing/poorly written in terms of
mechanics and structure
7. Adherence to APA (6th ed.)
1 point
no APA style errors
0.85 points
attempts in-text citation and reference list but 1 or 2 APA style
errors are present
0.75 points
attempts in-text citation and reference list; APA style errors are
present; inconsistencies in citation usage can be found
throughout the document
0.65 points
attempts either in-text citation or reference list but omits the
other
0.55 points
no attempt at APA style
Overall Score
Outstanding
18 or more
Superior
16 or more
Good
14 or more
Substandard
12 or more
Failure
0 or more
Integrative Case 6 O’Grady Apparel Company
O’Grady Apparel Company was founded nearly 160 years ago
8. when an Irish merchant named Garrett O’Grady landed in Los
Angeles with an inventory of heavy canvas, which he hoped to
sell for tents and wagon covers to miners headed for the
California goldfields. Instead, he turned to the sale of harder-
wearing clothing.
Today, O’Grady Apparel Company is a small manufacturer of
fabrics and clothing whose stock is traded in the OTC market.
In 2015, the Los Angeles–based company experienced sharp
increases in both domestic and European markets resulting in
record earnings. Sales rose from $15.9 million in 2014 to $18.3
million in 2015 with earnings per share of $3.28 and $3.84,
respectively.
European sales represented 29% of total sales in 2015, up from
24% the year before and only 3% in 2010, 1 year after foreign
operations were launched. Although foreign sales represent
nearly one-third of total sales, the growth in the domestic
market is expected to affect the company most markedly.
Management expects sales to surpass $21 million in 2016, and
earnings per share are expected to rise to $4.40. (Selected
income statement items are presented in Table 1.)
Because of the recent growth, Margaret Jennings, the corporate
treasurer, is concerned that available funds are not being used to
their fullest potential. The projected $1,300,000 of internally
generated 2016 funds is expected to be insufficient to meet the
company’s expansion needs. Management has set a policy of
maintaining the current capital structure proportions of 25%
long-term debt, 10% preferred stock, and 65% common stock
equity for at least the next 3 years. In addition, it plans to
continue paying out 40% of its earnings as dividends. Total
capital expenditures are yet to be determined.
Jennings has been presented with several competing investment
opportunities by division and product managers. However,
because funds are limited, choices of which projects to accept
must be made. A list of investment opportunities is shown
in Table 2. To analyze the effect of the increased financing
requirements on the weighted average cost of capital (WACC),
9. Jennings contacted a leading investment banking firm that
provided the financing cost data given in Table 3. O’Grady is in
the 40% tax bracket.
TABLE 1
Selected Income Statement Items
2013
2014
2015
Projected 2016
Net sales
$13,860,000
$15,940,000
$18,330,000
$21,080,000
Net profits after taxes
$1,520,000
$1,750,000
$2,020,000
$2,323,000
Earnings per share (EPS)
2.88
3.28
3.84
4.40
Dividends per share
1.15
1.31
1.54
1.76
TABLE 2
Investment Opportunities
Investment opportunity
Internal rate of return (IRR)
Initial investment
A
10. 21%
$400,000
B
19
200,000
C
24
700,000
D
27
500,000
E
18
300,000
F
22
600,000
G
17
500,000
TABLE 3
Financing Cost Data
Long-term debt: The firm can raise $700,000 of additional debt
by selling 10-year, $1,000, 12% annual interest rate bonds to
net $970 after flotation costs. Any debt in excess of $700,000
will have a before-tax cost, rd, of 18%.
Preferred stock: Preferred stock, regardless of the amount sold,
can be issued with a $60 par value and a 17% annual dividend
rate. It will net $57 per share after flotation costs.
Common stock equity: The firm expects its dividends and
earnings to continue to grow at a constant rate of 15% per year.
The firm’s stock is currently selling for $20 per share. The firm
expects to have $1,300,000 of available retained earnings. Once
the retained earnings have been exhausted, the firm can raise
additional funds by selling new common stock, netting $16 per
share after underpricing and flotation costs.
11. TO DO
· a. Over the relevant ranges noted in the following table,
calculate the after-tax cost of each source of financing needed
to complete the table.
Source of capital
Range of new financing
After-tax cost (%)
Long-term debt
$0–$700,000
_________
$700,000 and above
_________
Preferred stock
$0 and above
_________
Common stock equity
$0–$1,300,000
_________
$1,300,000 and above
_________
· b.
· (1) Determine the break point associated with common equity.
A break point represents the total amount of financing that the
firm can raise before it triggers an increase in the cost of a
particular financing source. For example, O’Grady plans to use
25% long-term debt in its capital structure. So, for every $1 in
debt that the firm uses, it will use $3 from other financing
sources (total financing is then $4, and because $1 comes from
long-term debt, its share in the total is the desired 25%).
From Table 3, we see that after the firm raises $700,000 in
long-term debt, the cost of this financing source begins to rise.
Therefore, the firm can raise total capital of $2.8 million before
the cost of debt will rise ($700,000 in debt plus $2.1 million in
other sources to maintain the 25% proportion for debt), and $2.8
12. million is the break point for debt. If the firms wants to
maintain a capital structure with 25% long-term debt and it also
wants to raise more than $2.8 million in total financing, it will
require more than $700,000 in long-term debt, and it will
trigger the higher cost of the additional debt it issues beyond
$700,000.
· (2) Using the break points developed in part (1), determine
each of the ranges of total new financing over which the firm’s
weighted average cost of capital (WACC) remains constant.
· (3) Calculate the weighted average cost of capital for each
range of total new financing. Draw a graph with the WACC on
the vertical axis and total money raised on the horizontal axis,
and show how the firm’s WACC increases in “steps” as the
amount of money raised increases.
· c.
· (1) Sort the investment opportunities described in Table
2 from highest to lowest return, and plot a line on the graph you
drew in part (3) above showing how much money is required to
fund the investments, starting with the highest return and going
to the lowest. In other words, this line will plot the relationship
between the IRR on the firm’s investments and the total
financing required to undertake those investments.
· (2) Which, if any, of the available investments would you
recommend that the firm accept? Explain your answer.
· d.
· (1) Assuming that the specific financing costs do not change,
what effect would a shift to a more highly leveraged capital
structure consisting of 50% long-term debt, 10% preferred
stock, and 40% common stock have on your previous findings?
(Note: Rework parts b and c using these capital structure
weights.)
· (2) Which capital structure—the original one or this one—
seems better? Why?
· e.
· (1) What type of dividend policy does the firm appear to
employ? Does it seem appropriate given the firm’s recent
13. growth in sales and profits and given its current investment
opportunities?
· (2) Would you recommend an alternative dividend policy?
Explain. How would this policy affect the investments
recommended in part c(2)?