Financial plan on VW Camper Van rental business
(1) Where might funding for this type of venture come from? Evaluate which one would you choose. (max 750 words)
This business targets the market for renting vehicles during holidays. With more people willing to take a trip in van, rental business is attractive for private investment with increasing profitability (Cassar, 2014). Travelling in van in a healthy and environmental friendly way, which can build up relationship with families and lovers at the same time, is fashion for many people. It is urgent to fund the program to run the business.
It is known that funding for starting a new business can come from several ways. On the one hand, payback schedule is considered, which leads to the choice between long term funding and short time funding. The timeline of funds should be involved in corporate finance because the requirement of payback may incur risk of default, which is challenge for a newly born business. Considering that small size business at early age is vulnerable to the changeable economic situation, it is preferred to pay the investment back as late as possible (Tian and Li, 2002). On the other hand, capital fund or borrows are two ways accessible to start the business. Capitalized funding consists of several options, including direct absorption of investment and stock offerings. For the private small business, direct investment from private equity is a practical way. Liabilities come from bank loan, bonds and others. For the record of this classification, compared with liabilities, equity provides corporation with little financial burdens such as fixed payment of interest (Zuo, 2002). However, capitalized funding is tough for new starter, because it is hard to recruit new partners. Bank loan is the common way to fund the new program due to comparably low interest fee and convenience. In addition, finance lease stands out because it provides equipments and plants with actually installment.
(2) Create your own five year financial plan (from start-up) that you would use to impress potential investors. (Use notes and appendices to show detailed calculations.)
There are some assumptions to give. It is not easy to predict the demands of the camper van rental business, because the demands are influenced by specific clients. It is presumed that there are 52 weeks in a year. As required by utilization rate, the revenues per van in one year are estimated as below. ....................
(3) Using your year five financial forecast, how might you value the business? Critically considering the advantages and disadvantages of a full range of exit strategy options, justify which one you would choose. (max 750 words)
Before making decision about the profitability of the business, it is preferred to presume that two vans are invested into the business (Onyemah, Rivera Pesquera, and Ali, 2014). Depending on the financial plan above, it can be realized that with more vehicles invested into the rental business, both of the revenues and profits increase. To explain the balance between costs and revenues, calculate the gross profit margin to compare the costs with the revenues from the perspective of investors (Lagace, 2003). Gross profit margin is calculated from the net profit divided by total investment, involv