! Required information [The following information applies to the questions displayed below.] Lab Insight: Unexpected events like natural disasters are events businesses must prepare for. They can result in decreased revenue, inflated expenses, and loss of facilities or customers. Because of these risks, many businesses invest in business interruption insurance. In this lab, you'll be determining what amount of lost sales will be covered by insurance in the case of a fire at one of the plants of Montana Manufacturing Company. Required: 1. Calculate the gross margin lost on lost sales. 2. Use NPV to determine how much loss will be covered by business interruption insurance. Open Excel file Alt Lab 12-5 Excel Data.xlsx and perform the NPV analysis. Note the differences in discount rate, initial losses, and gross margin percentage. Ask the Question: What amount of the loss from the fire will be covered by insurance? Master the Data: Apply the same steps as Lab 12-5 Excel to the Alt Lab 12-5 Data.xlsx dataset. Mississippi Muffins is a large bakery chain that recently experienced a fire at one of its most prominent locations. Management is worried that they may lose hundreds of customers that sum to a substantial number of sales. Fortunately, they have business interruption insurance that covers lost sales for 8 years. Use the NPV function to calculate the net present value of the insurance coverage. The setup of the data for this lab is similar to Lab 12-5 Excel. Software needed ⚫ Excel ⚫ Screen capture tool (Windows: Snipping Tool; Mac: Cmd+Shift+4) Data: Alt Lab 12-5 Data.xlsx Perform the Analysis: Refer to Lab 12-5 Alternate in the text for instructions and Lab 12-5 steps for each the of lab parts. Answer the following questions based the details provided. Note: Round your answers to 2 decimal places. Question 1. What is the net present value of the business interruption loss when 200 customers are lost (Scenario 1) assuming a 6% discount rate? 2. What is the net present value of the business interruption loss when 200 customers are lost (Scenario 1) assuming a 10% discount rate? 3. What is the net present value of the business interruption loss when 100 customers are lost (Scenario 3) assuming a 6% discount rate? 4. What is the net present value of the business interruption loss when no customers are lost (Scenario 3) assuming an 8% discount rate? 5. What is the net present value of the business interruption loss when no customers are lost (Scenario 3) assuming a 10% discount rate? Answer Initial Loss $ es is Annual Loss (100 Customers) $ Gross Margin Discount Rate 500,000 50,000 45% 8% Scenario 1 Scenario 2 Scenario 3 Lose No Customers Gross Margin Lose 200 Customers Lose 100 Customers Gross Margin Lost Sales Gross Margin Lost Sales Year Lost Sales 1 2 3 4 5 6 7 8 9

! Required information [The following information applies to the questions displayed below.] Lab Insight: Unexpected events like natural disasters are events businesses must prepare for. They can result in decreased revenue, inflated expenses, and loss of facilities or customers. Because of these risks, many businesses invest in business interruption insurance. In this lab, you'll be determining what amount of lost sales will be covered by insurance in the case of a fire at one of the plants of Montana Manufacturing Company. Required: 1. Calculate the gross margin lost on lost sales. 2. Use NPV to determine how much loss will be covered by business interruption insurance. Open Excel file Alt Lab 12-5 Excel Data.xlsx and perform the NPV analysis. Note the differences in discount rate, initial losses, and gross margin percentage. Ask the Question: What amount of the loss from the fire will be covered by insurance? Master the Data: Apply the same steps as Lab 12-5 Excel to the Alt Lab 12-5 Data.xlsx dataset. Mississippi Muffins is a large bakery chain that recently experienced a fire at one of its most prominent locations. Management is worried that they may lose hundreds of customers that sum to a substantial number of sales. Fortunately, they have business interruption insurance that covers lost sales for 8 years. Use the NPV function to calculate the net present value of the insurance coverage. The setup of the data for this lab is similar to Lab 12-5 Excel. Software needed ⚫ Excel ⚫ Screen capture tool (Windows: Snipping Tool; Mac: Cmd+Shift+4) Data: Alt Lab 12-5 Data.xlsx Perform the Analysis: Refer to Lab 12-5 Alternate in the text for instructions and Lab 12-5 steps for each the of lab parts. Answer the following questions based the details provided. Note: Round your answers to 2 decimal places. Question 1. What is the net present value of the business interruption loss when 200 customers are lost (Scenario 1) assuming a 6% discount rate? 2. What is the net present value of the business interruption loss when 200 customers are lost (Scenario 1) assuming a 10% discount rate? 3. What is the net present value of the business interruption loss when 100 customers are lost (Scenario 3) assuming a 6% discount rate? 4. What is the net present value of the business interruption loss when no customers are lost (Scenario 3) assuming an 8% discount rate? 5. What is the net present value of the business interruption loss when no customers are lost (Scenario 3) assuming a 10% discount rate? Answer Initial Loss $ es is Annual Loss (100 Customers) $ Gross Margin Discount Rate 500,000 50,000 45% 8% Scenario 1 Scenario 2 Scenario 3 Lose No Customers Gross Margin Lose 200 Customers Lose 100 Customers Gross Margin Lost Sales Gross Margin Lost Sales Year Lost Sales 1 2 3 4 5 6 7 8 9

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter12: Professional Venture Capital

Section: Chapter Questions

Problem 5EP

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