Raising Entrepreneurial Capital

Utilities,

insurance, etc.

2.5 2.2 2.4 2.5 2.5 2.8 2.7 2.5 2.6 2.6 2.6 2.4

Salaries—selling 60.0 62.0 65.8 62.8 62.7 67.9 71.6 62.8 64.9 66.9 68.0 65.0

Commissions 5.9 5.0 5.8 6.8 6.9 7.4 8.0 7.8 6.5 6.8 6.4 6.4

Travel 7.0 7.1 6.9 6.8 7.6 7.8 8.4 7.5 7.7 7.7 7.9 7.4

Advertising 6.0 6.5 7.0 9.0 8.5 8.7 8.3 8.1 7.0 7.2 6.0 7.5

Other charges—

selling

5.0 6.0 3.0 40.0 50.0 21.5 18.3 18.7 18.9 16.0 8.5 14.0

Salaries—

administration

35.0 35.0 34.0 33.0 36.0 36.0 38.0 39.0 35.0 33.0 32.0 34.0

Leasing 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8 5.8

Research and

development

8.3 10.3 15.6 7.5 8.3 7.7 7.9 6.2 6.7 6.9 6.3 8.3

Taxes 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3

Purchase of assets 40.0 45.0 33.0 350.0 500.0 16.8 23.8 23.0 18.0 20.0 20.0 10.0

SENSITIVITY ANALYSIS

. What would happen to New Tech’s need for external financing if sales

varied plus or minus 10%, 20%, and 30% from the forecasted level?

Prepare a sensitivity analysis.

. What would happen to New Tech’s financing needs if customers began to

pay 15% in the month of sale, 60% the month after, and the rest in 2

months? At least 3% bad debts remain.

BIBLIOGRAPHY

Brealey, Richard A. and Stewart C. Myers, Principles of Corporate Finance, ed 5, Irwin-

McGraw Hill, New York, 1996.

Brigham, Eugene F. and Phillip R. Daves, Intermediate Financial Management, ed 7, South-

Western, Mason, OH, 2002.

Copeland, Thomas E. and J. Fred Weston, Financial Management, ed 9, Dryden Press, Fort

Worth, Texas, 1992.

Jassy, Andrew R., Laurence Katz, Kevin Kelly, and Baltej Kochar, ‘‘Cash Management

Practices in Small Companies,’’ Harvard Business School Note, December 4, 1998.

Stancill, James McNeill, ‘‘When Is There Cash in Cash Flow?’’ Harvard Business Review,

March-April, 38–49, 1987.

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