Mr. Neil Down is a sole trader and owns WoodyTrain, a toy store specialising in handcrafted woodentrain toys. Mr Neil wants to raise £20,000 by getting a new partner.

Instructions

1. Analyse the types of business budgets that Mr Neil Down may have prepared for thisbusiness organisation. Recommend how these budgets would allow a new partner to make
an informed decision about investment.

2. Explain the different methods Mr Neil Down could use to calculate the unit cost of the
handcrafted wooden train toys.

Year                  Toy Store A                Toy Store B

0                           -375 000                   -425 000
1                            200 000                    200 000
2                            110 000                    150 000
3                            220 000                    300 000
4                            130 000                    250 000


The toy store's cost of capital is 12%. The extract from present value tables of £1 @ 12%:
Year 1 0.893
Year 2 0.797
Year 3 0.712
Year 4 0.636

REQUIRED:
o Calculate for each building:
§ Payback
§ Net Present Value
o Recommend and justify, based on your financial analysis, which Toy Store,WoodyTrain should purchase.

Answer rating: 100% (QA)

SOLUTION 1 Mr Neil Down may have prepared various types of budgets for his business organization including Sales budget This budget would outline the expected sales revenue for the upcoming period A n... View the full answer