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Case Study: Financial Management

Case Study: Financial Management<br><br>Operations, Projects, People and Task Resources

Urbanetectonics
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Case Study: Financial Management

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  1. June 22 2023 Financial Analysis: Business Case Study Case Study Problem: Operations, Projects, People and Task Resources

  2. LEGEND BOOKS & PUBLISHING BUSINESS DESCRIPTION Urbanetectonics, LLC is a management consulting firm serving Owners, Managers and Administrators who have the need for business process outsourced solutions, whether project, team or enterprise management; for quality management solutions and for integrated productized service deliverables. Our management umbrella consists of vertically integrated divisions of management consulting services, through 10 key project types, across 12 industries and delivered by 4 organizational types of teams. ORGANIZATIONAL STRUCTURE Urbanetectonics, LLC operates by an executive committee of 2 to 4 members, also called the management team and an annually selected advisory board of a minimum of 2 to 4 members, also called the parallel team. Our integrative service and products are delivered with work team and project team support. These teams are built to serve according to project need, size, and work load. When needed, each team can have 5 to 7 subject matter experts with a representative from our management team as the single point of contact. CONTACT LOCATIONS Urbanetectonics, LLC is based out of Cibolo, Texas and has a second location in Findlay, Ohio. Tanesha Bokally Managing Member Urbanetectonics, LLC 725 FM 1103 PMB 133, Cibolo, Texas 78108 www.urbanetek2.com

  3. CASE STUDY PROBLEM OR ROOT CAUSE: PROJECT TEAM'S LONG DISTANCE TRAVEL TO SERVICE A NEW CLIENT The consulting firm has been hired as a sub-consultant to serve a Fortune 500 corporate client. The service contract is to prepare a capital budget for a project team servicing one of their clients 500 miles or less away from the corporate office location. As a sub-consultant, we are to consider transportation options, whether it would be best to drive current/purchased/leased company vehicles, fly or drive to the location or use a drive sharing service or taxi once they arrive; whether it is best to transfer, hire new or contract more employees; whether to keep, buy new or lease mobile laptops. The client service contract will be long-term, so the project budget will need to be set into a new local operating budget. The firm has to compose a strategic plan for the new location that discusses whether or not the client firm will need to take out a business loan for working capital or can used retained earnings to fund the new location. Using the time value of money (TVOM) concepts, 10 principles of engineering economic analysis, Present Worth (PW), Capital Worth (CW), Cost Benefit Analysis (B/C), Discounted Payback Period (DPBP), Annual Worth (AW), Future Worth (FW), Minimum Attractive Rate of Return (MARR), Weighted Average Cost of capital (WACC), the four discounted cash flow (DCF) rules, interest rate, discount rate, Internal Rate of Return (IRR), External Rate of Return (ERR), Six Sigma Lean, Depreciation, Inflation, Break Even Analysis or income tax charting, etc., our firm will demonstrate how the 7 steps of systematic economic analysis technique (SEAT) provides a framework and consistent methodology to considering capital investments and composing capital budgets. The math in the calculations, formulas and equations used in this case study have not been reviewed, discussed or confirmed by the financial analyst or AI calculator. Consider the methods, concepts and principles, in addition to the monetary implications, when making your selection. Non-monetary or past expenses are mentioned but are not considered in this case study.

  4. LEGEND BOOKS & PUBLISHING PROJECT TEAM MEMBERS Team Member 1 Project Manager Team Member 4 Financial Analyst Team Member 2 Business Analyst Team Member 5 Legal Analyst Team Member 3 Professional Development Trainer

  5. LEGEND BOOKS & PUBLISHING FINANCIAL ANALYSIS: PROJECTED OPERATING BUDGET - NEW LOCATION AT 500 MILES AWAY Classification: Fixed Total Professional, Umbrella, Automobile, & General Liability $ 800.00 Workers Comp/Payroll Fee/Fee $ >266 .00 Pre-Paid Legal Agent/Legal Services $ >950.00 Business Registrations Licenses $ >300.00 Bookkeeping/Accounting Services/ $ 1,650.00 Industry Memberships $ 4,275.00 Lease/Utilities/PO Box/Phone, Location #1 $ >600.00 Lease/Utilities/PO Box/Phone, Location #2 $ >600.00 Contingency: _5_% $ 450.50 Depreciation: Hardware/Software $ 1500.00 Fixed Expenses Subtotal: - $ 10,385.10 Classification: Variable Total Marketing/Proposals/Content/Promotions/Supplies $ 1,200.00 Cost Acquisition Costs/Research & Development (Goal:10% of Sales ) $ 1,092.55 Amortization: Copyrights, Trademarks, Service Marks, & Patents $ 8,350.00 Corporate Volunteerism/Business Gifts & Promotion/Donations $ 1,200.00 Continuing Education/Software Training Coding 3D Video $ 1,749.50 Gas/Travel/Food/Lodging/Transportation $ 1,500.00 Variable Expenses Subtotal: - $ 15,114.00 Classification: Payroll Total Business Relationship Manager 20% of Sales Commission Based $ 46,800.00 Industry Divisional Manager 20% of Sales Commission Based $ 46,800.00 Project Team Manager 20% of Sales Commission Based $ 46,800.00 Integrated Systems Manager 20% of Sales Commission Based $ 46,800.00 Contract Labor Varies per Contract or $ 72,000.00 Member Partner 20% of Sales Revenue Based Managing Partner 20% of Sales Revenue Based Payroll Expenses Subtotal: - $ 187,200.00

  6. LEGEND BOOKS & PUBLISHING FINANCIAL ANALYSIS: PROJECTED OPERATING BUDGET - NEW LOCATION AT 500 MILES AWAY Projected Profit: GPM ___% NPM ___% 73% EBITDA $ 560,000.00 Total Projected Operating Expenses -$ 212,699.10 Taxes: Payroll/Income/Employee 39___%of Net Income -$ 116,818.05 Member Partner Equity/Profit Distribution/Dividends -$ 29,000.00 Member Partner Equity/Profit Distribution/Dividends -$ 9,000.00 Depreciation Year 1: Laptops +$2500 per laptop*5 +$ 12,500.00 Depreciation Year 1: Automobiles/Mileage +$ 19,200.00 per car*3 +$ 57,600.00 Net Income: $ 262,582.85 CAPex: 3 Automobiles; 5 Laptops -$ 65,754.00 Projected Retained Earnings : $ 196,828.85 Profit Current Year * Inflation: 4%=Projected Revenue for next year $582,400.00 Project Units for Break-Even Analysis: 12 to 13 Projects; Contracts of > = to $50,000.00

  7. LEGEND BOOKS & PUBLISHING FINANCIAL ANALYSIS: PROJECT EXPECTED CASH FLOW, OVERHEAD AND PROFIT (OHP) Project Mobilization Budget: $21,877.58 Duration: 60 days Purpose: Staff and Expenses Phase I Fee: $10,725 - $11,517.79 Duration: 21.45 days; 171.6 hours Budget: $6435 Staff: $22.50 hr, Business Analyst; Educational Trainer; and/or Project Coordinator Expenses: Not to exceed expense Budget, Airline, Hotel, Car, Equipment, Supplies, and Support. Phase II Invoice: $10,725 - $11,517.79 Net 30 days? Fee: $15,002.50 - $16,122.22 Duration: 30.025 days; 240.2 hours Budget: $9007.58 Staff: $22.50 hr, Business Analyst; Educational Trainer; and/or Project Coordinator Expenses: Not to exceed expense Budget, Airline, Hotel, Car, Equipment, Supplies, and Support. Phase III Invoice: $15,002.50 - $16,122.22 Net 30 days? Fee: $10,725 - $11,517.79 Duration: 21.45 days; 171.6 hours Budget: $6435 Staff: $22.50 hr, Business Analyst; Educational Trainer; and/or Project Coordinator Expenses: Not to exceed expense Budget, Airline, Hotel, Car, Equipment, Supplies, and Support.

  8. LEGEND BOOKS & PUBLISHING FINANCIAL ANALYSIS: PROJECT CASH FLOW, OVERHEAD AND PROFIT (OHP) PER PHASE Phase IV Invoice: $10,725 - $11,517.79 Net 30 days? Fee: $4,604.43 Duration: 8.75 days; 68.6 hours Budget: $2,762.66 Staff: $22.50 hr, Business Analyst; Educational Trainer; and/or Project Coordinator Expenses: Not to exceed expense Budget, Airline, Hotel, Car, Equipment, Supplies, and Support. Phase V Invoice: $4,604.43 - remaining Fee: $2,308.93 Duration: 4.25 days; 34 hours Budget: $1385.36 Staff: $22.50 hr, Business Analyst; Educational Trainer; and/or Project Coordinator Expenses: Not to exceed expense Budget, Airline, Hotel, Car, Equipment, Supplies, and Support. Project Closeout Invoice: $2,308.93 - remaining Collect remaining for 60 days

  9. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS BUSINESS LOANS - COST OF WORKING CAPITAL Cost of Working Capital $100,000 loan will be acquired for working capital for the new location. The cost of capital (WACC) will be 15%, since the client is a new business with out established business credit. The loan will begin payments after 3 years of business operations. Within the 8 year planning horizon, there are opportunities to payoff the loan from retained earnings. Each service contract is 2 years with renewals annually. The service contract sizes are greater than $150,000 for one year, etc. Small Business Loan - Cost of Capital Analysis 15% per Annum or year= 15%/12 months = .0125% Interest Loan Payment, PMT(15%,5,- FV(15%,3,,-10 000)) Principal Payment, PPmt(15%, 1,5,-10000) Interest Payment, Ipmt(15%,1,5, -10000) Unpaid Balance After Payment Unpaid Interest After Payment Unpaid Balance Before Payments Total Amount Owed Loan Payoff, PV(15%,1,5,-100000 Years 1 $100,000.00 $1,500.00 $101,500.00 $0.00 $0.00 $0.00 $0.00 $0.00 2 $115,000.00 $17,250.00 $132,250.00 $0.00 $0.00 $0.00 $0.00 $0.00 3 $132,250.00 $19,837.50 $152,087.50 $0.00 $0.00 $0.00 $0.00 $0.00 4 $152,090.00 $22,813.50 $174,903.50 $45,370.07 $14,831.56 $15,000.00 $129,533.43 $19,430.02 $112,634.29 5 $129,533.43 $19,430.02 $148,963.45 $45,370.07 $17,056.29 $12,775.27 $103,593.38 $15,539.01 $90,077.72 6 $103,593.38 $15,539.01 $119,132.39 $45,370.07 $19,614.73 $15,000.00 $73,762.32 $11,064.35 $64,137.67 7 $73,762.32 $11,064.35 $84,826.67 $45,370.07 $22,556.94 $15,000.00 $39,456.60 $5,918.49 $34,306.61 8 $39,456.60 $5,918.49 $45,375.09 $45,370.07 $25,940.48 $15,000.00 $5.03 $0.75 $0.89

  10. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS TRAVEL - COST TO FLY VERSUS COST TO DRIVE Transportation Costs to drive current/purchased/leased company vehicles, fly or drive to the location or use a drive sharing service or taxi once the project team arrives. $400 flight from one location to the other 500 miles away. Rental car would cost $800 a month plus $7,929 in gas annually. Uber/Lyft/Taxi would cost $10 one way from the hotel or living accommodations. Uber ride will cost between $1 and $2 per mile on average. Ride-hailing annually costs about $20,091 in the Midwest. It will cost $90.62 at $3.40 per gallon to drive a company car 500 miles one way. The monthly cost of the leased/purchased company car will be $500 per month plus $10,049 parking/gas/maintenance, etc. The service contract is 2 years. Based on driving about 12,500 miles per year. Tax write-off or reimbursables about 53.31 cents per gallon.

  11. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS COMPANY CARS - COST TO LEASE VERSUS COST TO PURCHASE Lease a Business Vehicle $5000 at signing, plus $500 a month Insurance, extra mileage charges, wear/tear expenses and new car rollover fees. After 4 years at $500 a month, your lease will cost $24,000 plus other fees. No interest and no maintenance costs. Payments are rolled into the operating and project budgets. Purchase a Business Vehicle No money down, about $500 a month Insurance, maintenance/repairs, etc. After 4 years at $500 a month, your purchase will cost $21,200 plus other fees. Payments are rolled into the operating and project budgets. Automobile Purchase - Loan Analysis 6% per Annum or year= 6%/12 months = .5% Interest Loan Payment, PMT(.5%, 48,-2000 0) Principal Payment, PPmt(0.5 %,1,48,-2 0000) Interest Payment, Ipmt(0.5 %,1,48,-2 0000) Unpaid Balance Before Payments Loan Payoff, PV(0.5%,24,- PMT(0.5%,48,- 20000)) Total Amount Owed Unpaid Balance After Payment Unpaid Interest After Payment Mont hs 1 $20,000.00 $100.00 $20,100.00 $469.70 $369.70 $100.00 $19,630.30 $98.15 2 $20,100.00 $100.50 $20,202.50 $469.70 $371.55 $98.15 $19,258.75 $98.15 3 $20,202.50 $101.01 $20,303.51 $469.70 $373.41 $96.29 $18,887.20 $96.29 4 $20,303.51 $101.51 $20,405.02 $469.70 $375.27 $94.43 $18,513.80 $94.44 12 $469.70 $390.55 $79.15 $18,138.53 $92.57 24 $469.70 $414.64 $55.06 $17,761.40 $90.69 $10,597.79 36 $469.70 $440.21 $29.49 $17,382.39 $88.81 $5,457.42 48 $469.70 $467.36 $2.34 $17,001.50 $86.91 $467.36

  12. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS TEAM DYNAMICS - HIRING 5 PEOPLE ON SALARY VERSUS CONTRACTING 5 PEOPLE AT AN HOURLY RATE Project Team Compensation 5 team members $22.50 per hour; $ 46,800.00 per the estimated # of hours per service contract $72,000 if made salary/benefits/other costs/commissions Hourly employees schedules can fluctuate to part-time, during fluctuations in revenue. Typically don't have health insurance, retirement plans, etc. Contract employees from an employment agency require 4 hour minimum per day. Minimum wage of $15.00 per hour. Contract terms include an insurance requirement, proof of funds, background checks, drug testing and other vetting activities.

  13. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS LODGING ACCOMMODATIONS: CORPORATE HOUSING VERSUS HOTEL Project Team Lodging Extended Stay Hotel Costs - $2000 per month, on-site utilities, parking, garbage disposal, maintenance, amenities. $500 for food, etc. Corporate Housing Costs - $1200 per month, plus $800 in utilities, food, parking, garbage disposal, renter's insurance, amenities, etc.

  14. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS EQUIPMENT - KEEP, REPLACE OR LEASE MOBILE WORKSTATION Business Mobile Workstation Each project team member will receive a new laptop which will cost the firm $10,000 each. The new laptop program will incur software and training costs of $2000 and will save in help desk costs of $12000. When purchased new the laptop will have a present value of $9523.81 and after 8 years of use will have a salvage value of $4810. New Laptop Equipment Present Worth Subtracted Cash Flow, Negative or Taken Away Plus Cash Flow, Added, Positive or Given MARR 5% per year Software/Trai ning Costs Helpdesk CostsSum of Costs = To Find P Given F, (P|F i%,n) Present Worth (PW) of Savings Excel PW Function =PV(5%,15,,-10000) Years Savings $ 10,000.00 $ (10,000.00)500 0 $ (2,000.00) 1 $ 10,500.00 525 $ 12,000.00 $ 10,000.00 0.95238 9,523.80 $9,523.81 $ (2,000.00) 2 $ 11,025.00 551 $ 12,000.00 $ 10,000.00 0.90703 9,070.30 $9,070.29 $ (2,000.00) 3 $ 11,576.25 579 $ 12,000.00 $ 10,000.00 0.86384 8,638.40 $8,638.38 $ (2,000.00) 4 $ 12,155.06 608 $ 12,000.00 $ 10,000.00 0.8227 8,227.00 $8,227.02 $ (2,000.00) 5 $ 12,762.82 638 $ 12,000.00 $ 10,000.00 0.78353 7,835.30 $7,835.26 $ (2,000.00) 6 $ 13,400.96 670 $ 12,000.00 $ 10,000.00 0.74622 7,462.20 $7,462.15 $ (2,000.00) 7 $ 14,071.00 704 $ 12,000.00 $ 10,000.00 0.71068 7,106.80 $7,106.81 $ (2,000.00) 8 $ 14,774.55 739 $ 12,000.00 $ 10,000.00 0.67684 6,768.40 $6,768.39 $ (2,000.00) 9 $ 15,513.28 776 $ 12,000.00 $ 10,000.00 0.64461 6,446.10 $6,446.09 $ (2,000.00) 10 $ 16,288.95 814 $ 12,000.00 $ 10,000.00 0.61391 6,139.10 $6,139.13 $ (2,000.00) 11 $ 17,103.39 855 $ 12,000.00 $ 10,000.00 0.58468 5,846.80 $5,846.79 $ (2,000.00) 12 $ 17,958.56 898 $ 12,000.00 $ 10,000.00 0.55684 5,568.40 $5,568.37 $ (2,000.00) 13 $ 18,856.49 943 $ 12,000.00 $ 10,000.00 0.53032 5,303.20 $5,303.21 $ (2,000.00) 14 $ 19,799.32 990 $ 12,000.00 $ 10,000.00 0.50507 5,050.70 $5,050.68 $ (2,000.00) 15 $ 20,789.28 0 1039 $ 12,000.00 $ 10,000.00 0.48102 4,810.20 $4,810.17

  15. LEGEND BOOKS & PUBLISHING CASE STUDY: ANALYSIS EQUIPMENT - KEEP, REPLACE OR LEASE MOBILE WORKSTATION Keep, Replace or Lease mobile workstation Cash Flow Approach to find Equivalent Uniform Annual Cost, EUAC to keep old laptop equipment) = PMT(i%, n, -Cost of Upgrade) + OM cost= PMT(5%,8,-10,000) + 12000=$13,547.22 Cash Flow Approach to find Equivalent Uniform Annual Cost, EUAC to replace old laptop equipment with new laptop equipment = PMT(i%,n,-Cost to Replace,Salvage Value) + OM cost= PMT(5%,8,-10,000,4810) + 2000 = $3,043.51 Cash Flow Approach to find EUAC to lease new laptop equipment. =PMT(i%,n,Sale Price of Old Equipment) + OM Costs-FV(i%,1,,Annual Lease Payment)= PMT(5%,8,4810) + 12000 - FV(5%,1,,$1547)=$12,880

  16. LEGEND BOOKS & PUBLISHING FINANCIAL ANALYSIS: SUMMARY Based on the financial output, after utilizing the 7 steps of systematic economic analysis technique (SEAT) and Six Sigma Lean concepts, we recommend the following: Consider $250,000 loan instead of $100,000 loan for working capital. Hire/Transfer 2 or 3 hourly employees and contract the other 2 or 3 employees for the new location. Drive company car(s) to the new location 500 miles away. Use shared driving for short local distances. Automobile purchase or lease are equivalent in value for a company car(s) for $20,000. Purchase not lease laptop workstations for $10,000 or less, if you can get a discount. Lease corporate housing for employee stay instead of extended stay hotel. Transfer lease option after 3 months.

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