ion buys wholesale propane from national distributors and sells it to end users, ly farms, rural homes, and businesses. Your customers are beyond the reach Igas retail pipeline companies called Local Distribution Companies (LDC's). you charge includes delivery in your company owned trucks. hager has asked you to look at an opportunity to buy out a competitor. He quick evaluation of this opportunity. This is not a request for a full-blown with bankers and lawyers, but simply if this opportunity should take priority over orts. You are being asked for a quick analysis considering everything you know opportunity. mpany is a moderately sized business vulnerable to larger competitors. You sider growth to be a good idea to enhance corporate value generating tal profits and allow greater economy of scale, or perhaps worry about the risk ng this acquisition. After all, money is tight and there may be other unknown ities in the future. rent business is summarized by the financials below: Current Propane Division $/ Gal SALES LP GAS COST OF LP GAS GROSS MARGIN UNITS SOLD, Gallons GROSS OPERATING INCOME DEPRECIATION FIXED CASH COSTS TOTAL FIXED EXPENSES SALARIES REGULAR PAYROLL TAXES TOTAL EMPLOYEE EXPENSES $/Yr $ 975,375 $ 675,000 $ 300,375 $ 675,000 $ 300,375 $ 15,525 $ 5,063 $ 20,588 $ 85,000 $ 8,500 $ 93,500 REPAIR & MAINT $ 15,000 TRUCK EXPENSE $ 35,000 TOTAL GENERAL EXPENSES $ 50,000 TOTAL OPERATING EXPENSES $164,088 DIRECT OPERATING INCOME $ 136,288 ALLOCATED INDIRECT COSTS $ 35,000 1.4450 1.0000 0.4450 0.4450 0.0230 0.0075 0.0305 0.1259 0.0126 0.1385 0.0222 0.0519 0.0741 0.2431 0.2019 0.0519
ion buys wholesale propane from national distributors and sells it to end users, ly farms, rural homes, and businesses. Your customers are beyond the reach Igas retail pipeline companies called Local Distribution Companies (LDC's). you charge includes delivery in your company owned trucks. hager has asked you to look at an opportunity to buy out a competitor. He quick evaluation of this opportunity. This is not a request for a full-blown with bankers and lawyers, but simply if this opportunity should take priority over orts. You are being asked for a quick analysis considering everything you know opportunity. mpany is a moderately sized business vulnerable to larger competitors. You sider growth to be a good idea to enhance corporate value generating tal profits and allow greater economy of scale, or perhaps worry about the risk ng this acquisition. After all, money is tight and there may be other unknown ities in the future. rent business is summarized by the financials below: Current Propane Division $/ Gal SALES LP GAS COST OF LP GAS GROSS MARGIN UNITS SOLD, Gallons GROSS OPERATING INCOME DEPRECIATION FIXED CASH COSTS TOTAL FIXED EXPENSES SALARIES REGULAR PAYROLL TAXES TOTAL EMPLOYEE EXPENSES $/Yr $ 975,375 $ 675,000 $ 300,375 $ 675,000 $ 300,375 $ 15,525 $ 5,063 $ 20,588 $ 85,000 $ 8,500 $ 93,500 REPAIR & MAINT $ 15,000 TRUCK EXPENSE $ 35,000 TOTAL GENERAL EXPENSES $ 50,000 TOTAL OPERATING EXPENSES $164,088 DIRECT OPERATING INCOME $ 136,288 ALLOCATED INDIRECT COSTS $ 35,000 1.4450 1.0000 0.4450 0.4450 0.0230 0.0075 0.0305 0.1259 0.0126 0.1385 0.0222 0.0519 0.0741 0.2431 0.2019 0.0519
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:You work for a moderately successful business that owns as a retail propane division.
This division buys wholesale propane from national distributors and sells it to end users,
specifically farms, rural homes, and businesses. Your customers are beyond the reach
of natural gas retail pipeline companies called Local Distribution Companies (LDC's).
The price you charge includes delivery in your company owned trucks.
Your manager has asked you to look at an opportunity to buy out a competitor. He
needs a quick evaluation of this opportunity. This is not a request for a full-blown
analysis with bankers and lawyers, but simply if this opportunity should take priority over
other efforts. You are being asked for a quick analysis considering everything you know
about the opportunity.
Your company is a moderately sized business vulnerable to larger competitors. You
may consider growth to be a good idea to enhance corporate value generating
incremental profits and allow greater economy of scale, or perhaps worry about the risk
of pursuing this acquisition. After all, money is tight and there may be other unknown
opportunities in the future.
Your current business is summarized by the financials below:
Current Propane Division
$/Yr
$ / Gal
$ 975,375
$ 675,000
$ 300,375
$ 675,000
$ 300,375
$ 15,525
$ 5,063
$ 20,588
SALES LP GAS
COST OF LP GAS
GROSS MARGIN
UNITS SOLD, Gallons
GROSS OPERATING INCOME
DEPRECIATION
FIXED CASH COSTS
TOTAL FIXED EXPENSES
SALARIES REGULAR
PAYROLL TAXES
TOTAL EMPLOYEE EXPENSES
REPAIR & MAINT
TRUCK EXPENSE
$ 15,000
$ 35,000
TOTAL GENERAL EXPENSES $ 50,000
TOTAL OPERATING EXPENSES $ 164,088
DIRECT OPERATING INCOME $ 136,288
ALLOCATED INDIRECT COSTS $ 35,000
$ 101,288
$ 85,000
$ 8,500
$ 93,500
NET OPERATING INCOME
1.4450
1.0000
0.4450
0.4450
0.0230
0.0075
0.0305
0.1259
0.0126
0.1385
0.0222
0.0519
0.0741
0.2431
0.2019
0.0519
0.1501
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