1. If you were in Jimmie’s shoes, would you sell Greg an equity stake in Lee’s Ice Cream? Explain. If Jimmie does sell equity to Greg for $3,300, what percentage of the business should he offer?

2. Assume that Jimmie rejects Greg’s offer. Brainstorm three other financing strategies for Jimmie to investigate.

3. Jimmie’s mother agrees to loan him $3,000 at an 8 percent interest rate. Calculate the total amount Jimmie will owe to his mother.

4. Jimmie will sell his ice cream cones for $2 each. Assume the following about Jimmie’s cost of goods sold for one ice cream cone:

Soft Serve Ice Cream: .20

Ice Cream Cone: .05

Napkin: .02

Topping: .03

a) What is the total COGS for one ice cream cone?

b) What is Jimmie’s gross profit per unit?

5. Jimmie believes that he can sell an average of 150 ice cream cones per day at $2 per cone. Jimmie operates his business 7 days per week between May and August for a total of 123 days. Calculate the following:

a) How many ice cream cones would Jimmie sell in total?

b) What would Jimmie’s total revenue be?

c) What is Jimmie’s total COGS?

d) Calculate Jimmie’s gross profit.

e) Assume that Jimmie’s total monthly operating costs are $1,500. His business operates for four months of the year. Calculate his total net profit for one year of business operations.

f) Create a projected income statement for the period from May 1 until August 31, 2012. Remember to include the interest to his mother for the four months and taxes at 25%. Assume that there is no depreciation or operating costs other than those described in the case study.

6. Examine Jimmie’s projected income statement that you developed for the previous question. Assume that Jimmie does decide to sell Greg partial ownership in Lee’s Ice Cream. Using the projected income statement as a guide, determine what percentage of his total equity Jimmie should offer Greg in exchange for $3,300. Is this a different percentage from the answer you gave in question U4-1? Explain.