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Financial Management HomeworkAssignment #2: Net Works1. You are-(Answered)

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Financial Management HomeworkAssignment #2: Net Works1. You are the Field Director for the brand new West Africa field office of a U.S.-basednot- for-profit organization called Net Works that distributes mosquito nets in developingcountries where Malaria is widespread. You are planning for your first year of operations,FY 2016. Your field office will have three full-time salaried employees. As FieldDirector, you will earn $50,000 per year; the two Field Managers will each earn $40,000per year. Health insurance and other benefits will equal 25% of each employee?s annualsalary. Rent and utilities for your office in Lagos will be $1,000 and $200 per month,respectively. You plan to take out a loan of $250,000 on the first day of the year and usethe proceeds to purchase five delivery trucks at a cost of $50,000 each. The loan carriesan annual interest rate of 8%. No principal repayments are due until next year. Each truckhas an expected useful lifetime of nine years and an expected salvage value of $5,000;your organization uses the straight-line depreciation method. Fuel, insurance, andmaintenance costs will total $800 per truck per month, and drivers? wages will cost anadditional $1,200 per truck per month. Each truck can deliver up to 2,500 nets per month.You have arranged to purchase mosquito nets for a discounted price of $4 each from amanufacturer. Under the terms of a contract, the Africa Coalition will pay Net Works $5for each net distributed. In addition, the Malaria Foundation has pledged a grant of$200,000 per year. (Note: there are no templates for this assignment.)1. Using break-even analysis, calculate the minimum number of nets that must bedistributed in FY 2016 in order to break even. Assume that all five trucks will beused (i.e. treat the costs associated with the trucks as fixed rather than step-fixed).2. Prepare a flexible annual operating budget for FY 2016 showing the followingthree scenarios: (1) the break-even quantity you calculated above, (2) 145,000nets, and (3) 150,000 nets.3. Prepare a quarterly cash budget (showing each of the four quarters and the annualtotal) assuming 150,000 nets will be delivered evenly throughout the year.Assume that all payments and receipts will be timely with the followingexceptions. The supplies payments, utilities payments, and Africa Coalitioncontract receipts will all occur with a one-month lag. The interest payment is duein the fourth quarter. The Malaria Foundation grant will be received in two equalinstallments in the first and second quarters.


Financial Management Homework

 

Assignment #2: Net Works

 

1. You are the Field Director for the brand new West Africa field office of a U.S.-based

 

not- for-profit organization called Net Works that distributes mosquito nets in developing

 

countries where Malaria is widespread. You are planning for your first year of operations,

 

FY 2016. Your field office will have three full-time salaried employees. As Field

 

Director, you will earn $50,000 per year; the two Field Managers will each earn $40,000

 

per year. Health insurance and other benefits will equal 25% of each employee?s annual

 

salary. Rent and utilities for your office in Lagos will be $1,000 and $200 per month,

 

respectively. You plan to take out a loan of $250,000 on the first day of the year and use

 

the proceeds to purchase five delivery trucks at a cost of $50,000 each. The loan carries

 

an annual interest rate of 8%. No principal repayments are due until next year. Each truck

 

has an expected useful lifetime of nine years and an expected salvage value of $5,000;

 

your organization uses the straight-line depreciation method. Fuel, insurance, and

 

maintenance costs will total $800 per truck per month, and drivers? wages will cost an

 

additional $1,200 per truck per month. Each truck can deliver up to 2,500 nets per month.

 

You have arranged to purchase mosquito nets for a discounted price of $4 each from a

 

manufacturer. Under the terms of a contract, the Africa Coalition will pay Net Works $5

 

for each net distributed. In addition, the Malaria Foundation has pledged a grant of

 

$200,000 per year. (Note: there are no templates for this assignment.)

 

1. Using break-even analysis, calculate the minimum number of nets that must be

 

distributed in FY 2016 in order to break even. Assume that all five trucks will be

 

used (i.e. treat the costs associated with the trucks as fixed rather than step-fixed).

 

2. Prepare a flexible annual operating budget for FY 2016 showing the following

 

three scenarios: (1) the break-even quantity you calculated above, (2) 145,000

 

nets, and (3) 150,000 nets.

 

3. Prepare a quarterly cash budget (showing each of the four quarters and the annual

 

total) assuming 150,000 nets will be delivered evenly throughout the year.

 

Assume that all payments and receipts will be timely with the following

 

exceptions. The supplies payments, utilities payments, and Africa Coalition

 

contract receipts will all occur with a one-month lag. The interest payment is due

 

in the fourth quarter. The Malaria Foundation grant will be received in two equal

 

installments in the first and second quarters.

 



 


 

 

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