Versalette

Location: 

Company Website:

For Sale Website:

Description:

Assumptions

  • The analyzed business has raised capital through donations given via the website Kickstarter.com 
  • The nature of the business is to produce and sell a wholesale women’s fashion product.
  • The proposed business plan is expected to create a relatively immediate return on starting working capital and assets.
  • The company will receive a loan for a greater amount of startup capital required for property plant & equipment used in the wholesale side of the business.
  • The internal rate of return is calculated using the forecasted amounts.
  • Actual financial statements for the company in 2012 (the base year) were unavailable. The amounts were estimated using industry averages and costs. 
  • The cost of manufacturing and raw materials is assumed to be domestic initially switching to international materials in the future.
  • The amount of unit sales is based on the industry average for unit per trade show per year.
  • The cost will include shipping, handling, and packaging in the cost of the item.
  • The sales labor force is assumed to be 2 people.
  • The advertising cost is associated with the initial monetary cost of brand recognition.

Conclusions

  • The initial sales and capital will not be enough in the first year for Versalette to make a profit in its inaugural year.
  • The net income is expected to grow for the foreseeable future.
  • The initial funding with the assumed bank loan for property plant and equipment will provide enough capital to fund the project if it continues long-term.
  • The WACC is a reasonable estimate for return that creditors and equity holders will expect.
  • The unlevered and re-levered beta WACC is a reasonable future estimate for the industry average of debt to equity as well as expected company return.
  • The NPV is sufficient to suggest positive future cash flows.
  • The IRR is much greater than the expected return on assets (WACC).

With the above-mentioned conclusions in mind, it is our conclusion that the Versalette should be produced and sold.  The financial projections of the endeavor suggest a high rate of return and a prospect for growth within the organization.  The raised capital will be sufficient to start the project, and the return is expected to be much greater than the initial investment.  The Versalette provides sound numbers to suggest financial viability and the endeavor is accordingly recommended for undertaking.                                     

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