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Financial Planning For A Small Business PDF

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Jayden Labitoria
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29 views25 pages

Financial Planning For A Small Business PDF

Uploaded by

Jayden Labitoria
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Responsible Team 5

Performance Task:
Financial Planning for a Small
Business

Aguja, Cabilino, Lazarito, Motonaga, Sanglay, Valenzuela


Scenario:
You have been hired as a financial advisor for a small business
that is planning for future growth and expansion. The business
owner wants to invest in a new marketing campaign and also
needs to plan for potential loan repayments. Your task is to help
the business owner with the following:
Investment Growth Calculation

The business plans to invest 15,000 in a marketing


campaign that is expected to grow at an annual rate of
7%, compounded quarterly. The business owner wants to
know the value of this investment after 5 years.
Investment Growth Calculation

To calculate the future value of an investment, we can use the


following formula:
A=P(1+ )
r nt
n
Investment Growth Calculation

where:
A = is the future value of the investment
P = is the initial amount/principle value
r = is the annual interest rate
n = is the number of the compounded value per year
t = is the number of years
Investment Growth Calculation

A=?
P = 15,000
r = 7% or .07
n=4
t=5
Investment Growth Calculation
Solution:
A = P ( 1 + ) .07 20
r nt
n
= 15,000 ( 1 + 4 ) 20
= 15,000 ( 1 + .017520 )
= 15,000 ( 1.0175 )
= 15,000 ( 1.4147782 )
= ₱ 21,221.667
Investments value after 5 years = 21,221.67
Loan Repayment Analysis:

The business also needs to take out a loan of 20,000 with an annual
interest rate of 6%, compounded monthly, to cover some additional
expenses. The loan will be repaid with monthly payments over 4 years.
Calculate the monthly payment required and the total amount paid
over the life of the loan. Also, determine the total interest paid.
Loan Repayment Analysis:

To calculate the monthly payment, total amount paid, and total


interest paid on the loan, we can use the following formula:
Loan Repayment Analysis:

given:
Loan amount = $20,000
Annual interest rate = 6% (compounded monthly)
Loan term = 4 years (48 months)
Loan Repayment Analysis:

1. Convert the annual interest rate to a monthly rate:


Monthly interest rate = 6% / 12 = 0.005
Loan Repayment Analysis:

2. Number of payments (n):


n = 4 × 12 = 48
Loan Repayment Analysis:

3. Use the formula for monthly payments (PMT):


Loan Repayment Analysis:

where: Substituting into the formula:


P = 20000
r = 0.005
n = 48 PMT ≈ 469.70

So, the monthly payment is $469.70.


Loan Repayment Analysis:

4. Total amount paid over the life of the loan:


Total amount paid = PMT × n = 469.70 × 48 ≈ 22,545.63
Investment Growth Calculation

5. Total interest paid:


Total interest = Total amount paid – P = 22,545.63 – 20,000 = 2,545.63
Profit Projection Using Geometric Series

The business expects the revenue from the marketing campaign to


increase in a geometric sequence due to increased customer acquisition.
The revenue from the campaign is projected to start at $5,000 in the
first month and grow by a factor of 1.10 each subsequent month.
Calculate the revenue for the 6th month and the total revenue over the
first 6 months
Profit Projection Using Geometric Series

1. Calculate the revenue for the 6th month:


Profit Projection Using Geometric Series

The formula for the nth term in a geometric sequence is:

an = a1 * r ^ (n - 1)
Profit Projection Using Geometric Series

where: Substituting into the formula:

a1 = 5000 a6 = 5000 * (1.1) ^ (6 - 1)


r = 1. a6 = 5000 * (1.1) ^ 5
n=6 a6 = 5000 * 1.61051
a6 = 8052.55

Revenue for the 6th month: P8,052.55


Profit Projection Using Geometric Series

2. Calculate the total revenue over the first


6 months:
Profit Projection Using Geometric Series

The formula for the sum of a geometric series is:


Profit Projection Using Geometric Series
Substituting into the formula:
where:
a1 = 5000
r = 1.10
n=6

The total revenue over the first 6 months is P38,578.05.


Thank You!

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