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Question Description

About Your Signature Assignment

This signature assignment is designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. The signature assignments may be graded with an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for program improvements.

Purpose of Assignment

The purpose of this assignment is to allow the student an opportunity to apply their understanding of cash flow management, break-even analysis, and short-term and long-term financing in starting and growing a business.

Assignment Steps

Resources: OECD Database, Corporate Finance

Prepare a 12- to 15-slide PowerPoint® presentation with speaker notes requesting initial funding of $500,000 to start and run a start-up company. The proposed start-up company could be an existing business model (coffee shop, pet store, etc.) or could be something entirely new and exciting.

Create the presentation in the following format, with at least one slide to cover each of the following areas:

  • Title Page
  • Table of Contents
  • Executive Summary
  • Information about the Industry
  • Marketing Plan
  • Competitor Analysis
  • 3 Year Income Statement (Profit & Loss) Projections
  • Include your assumptions for why and how you will achieve your sales growth and what significant expenses and investments you expect to incur to achieve your revenue goals.
  • 3 Year Proposed Funding Schedule (Sources and uses of the funds received.)
  • Break-Even Analysis
  • Academic and Business References

Review the following scenarios and assumption, and explain how it impacts your decision to expand:

  • After Year 3, the investors are interested in your company expanding internationally to possibly outsource labor or to reduce manufacturing costs. What countries would you expand to first, and why? What factors would you need to consider in making this decision?
  • What is the corporate tax rate in the countries you are considering expanding your business to, and how will that affect your decision to expand globally? (Use OECD Database or another resource to determine the corporate tax rate).
  • The investors want to see a decision tree detailing the decisions you would make if you received $300K now and $200K at the end of three years instead of $500K up front.
  • The investors would like your team to provide advantages and disadvantages of using debt financing versus selling company stock to raise capital for growth.
  • Briefly explain the venture capital process. Does it make sense for your company to raise funds through venture capital?

Format your presentation consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.

Materials

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Signature Assignment: Short-Term Funding Grading Guide FIN/571 Version 9 Foundations of Corporate Finance Copyright Copyright © 2017, 2016, 2013 by University of Phoenix. All rights reserved. University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries. Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Signature Assignment: Short-Term Funding Grading Guide FIN571 Version 9 Individual Assignment: Signature Assignment: Short-Term Funding Purpose of Assignment The purpose of this assignment is to allow the student an opportunity to apply their understanding of cash flow management, break-even analysis and short-term and long-term financing in starting and growing a business. Resources Required OECD Database Grading Guide Content Prepared and delivered a PowerPoint® presentation requesting initial funding of $500,000 to start and run a start-up company. The proposed start-up company could be an existing business model (coffee shop, pet store, etc.) or could be something entirely new and exciting. Created the presentation in the following format, with at least one slide to cover each of the following areas: • • • • • • • • • • • Title Page Table of Contents Executive Summary Information about the Industry Marketing Plan Competitor Analysis 3 Year Income Statement (Profit & Loss) Projections Include your assumptions for why and how you will achieve your sales growth and what significant expenses and investments you expect to incur to achieve your revenue goals. 3 Year Proposed Funding Schedule (Sources and uses of the funds received.) Break-Even Analysis Academic and Business References Reviewed the following scenarios and assumption, and explained how it impacts the decision to expand: • After Year 3, the investors are interested in expanding the company Met Partially Met Not Met Comments: 2 Signature Assignment: Short-Term Funding Grading Guide FIN571 Version 9 Content Met Partially Met Not Met Total Available Total Earned 5 #/5 Partially Met Not Met Comments: internationally to possibly outsource labor or to reduce manufacturing costs. What countries would you expand to first, and why? What factors would you need to consider in making this decision? • What is the corporate tax rate in the countries you are considering expanding your business to, and how will that affect your decision to expand globally? (Use OECD Database or another resource to determine the corporate tax rate). • The investors want to see a decision tree detailing the decisions you would make if you received $300K now and 200K at the end of three years instead of $500K upfront? • The investors would like your team to provide advantages and disadvantages of using debt financing versus selling company stock to raise capital for growth. • Briefly explain the venture capital process. Does it make sense for your company to raise funds through venture capital? The presentation is 7-12 slides in length. Writing Guidelines The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page. Met Comments: 3 Signature Assignment: Short-Term Funding Grading Guide FIN571 Version 9 Writing Guidelines Met Partially Met Not Met Total Available Total Earned 2 #/2 7 #/7 Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Assignment Total Additional comments: # Comments: 4 F -X C h a n ge F -X C h a n ge N y bu OECD TAX DATABASE EXPLANATORY ANNEX PART II TAXATION OF CORPORATE AND CAPITAL INCOME (Document updated October 2016) 1 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu Table of contents II.1. BELGIUM II.1. CANADA II.1. CHILE II.1. FRANCE II.1. GERMANY II.1. GREECE II.1. HUNGARY II.1. ISRAEL II.1. ITALY II.1. LATVIA II.1. LUXEMBOURG II.1. MEXICO II.1. NETHERLANDS II.1. NORWAY II.1. POLAND II.1. SLOVAK REPUBLIC II.1. SLOVENIA II.1. SWITZERLAND II.1. UNITED STATES 4 5 5 5 6 6 9 9 10 16 17 18 18 18 19 19 20 20 20 II.2. BELGIUM II.2. CANADA II.2. CHILE II.2. CZECH REPUBLIC II.2. HUNGARY II.2. ISRAEL II.2. ITALY II.2. LATVIA II.2. MEXICO II.2. NETHERLANDS II.2. NORWAY II.2. PORTUGAL II.2. SLOVAK REPUBLIC II.2. SPAIN II.2. UNITED KINGDOM II.2. UNITED STATES 22 24 25 25 26 26 27 27 27 28 28 28 29 29 30 31 II.3. CANADA II.3. GERMANY II.3. LUXEMBOURG II.3. KOREA 32 33 33 33 2 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu II.3. PORTUGAL II.3. SWITZERLAND II.3. UNITED STATES 33 34 34 II.4. AUSTRIA II.4. BELGIUM II.4. CANADA II.4. CHILE II.4. FINLAND II.4 FRANCE II.4. GERMANY II.4. GREECE II.4. HUNGARY II.4. IRELAND II.4. ISRAEL II.4. ITALY II.4. KOREA II.4. LATVIA II.4. MEXICO II.4. NETHERLANDS II.4. NORWAY II.4. PORTUGAL II.4. SLOVAK REPUBLIC II.4. SLOVENIA II.4. SWITZERLAND II.4. UNITED STATES 36 36 37 37 37 37 38 39 40 41 41 42 43 43 43 43 43 44 44 44 44 45 3 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu PART II. TAXATION OF CORPORATE AND CAPITAL INCOME PART II, TABLE 1 CORPORATE INCOME TAX RATES II.1. BELGIUM The effective CIT rate can be substantially reduced by an allowance for corporate equity (ACE). The amount of this allowance is neither related to the behaviour nor to the results of the company, but depends only upon the amount of qualifying corporate equity and the yield on long term government bonds. There is however an upper limit. The original upper limit (of 6.5 % for non-SMEs) was first temporarily reduced to 3.8% in 2010 and 2011 and then permanently lowed to 3% from 2012 onwards. The effectively applied ACE-rates are listed in the table below. Stricter carry forward rules concerning unused ACE-deductible amounts were implemented from 2013 onwards. Notional interest rate (ACErate) Non-SMEs Small and medium enterprises (SMEs) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3.442% 3.781% 4.307% 4.473% 3.8% 3.425% 3% 2.742% 2.63% 1.63% 1.131% 3.942% 4.281% 4.807% 4.973% 4.3% 3.925% 3.5% 3.242% 3.13% 2.13% 1.631% The lower the return on equity before tax, the lower the effective tax rate due to this allowance for corporate equity. E.g. the effective tax rate is only half the nominal tax rate when the return on equity before tax is twice the notional interest rate. The following table illustrates the impact of the ACE on the effective tax rate when the gross return on equity equals respectively 2, 3 or 4 times the notional interest rate. non-SMEs 2016 Gross return on equity (gROE) gROE / ACE-rate ACE-rate 2016 Tax base Nominal CIT rate CIT Net profit without ACE 2.262 gROE = 2 ACErate 2.262 gROE = 3 ACErate 3.393 gROE = 4 ACErate 4.524 2 0 2.262 33.99% 0.769 1.493 2 1.131 1.131 33.99% 0.384 1.878 3 1.131 2.262 33.99% 0.769 2.624 4 1.131 3.393 33.99% 1.153 3.371 4 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu Effective CIT rate 33.990% 16.995% 22.660% 25.493% II.1. CANADA The representative sub-central government tax rate is an average of provincial corporate income tax rates, weighted by the provincial distribution of the federal corporate taxable income. A federal surtax increased the general federal corporate income tax rate by 1.12 % between 1995 and 2007. Budget 2006 eliminated this surtax for all corporations as of January 1, 2008. II.1. CHILE Business profits made by individuals or legal entities resident or domiciled in Chile are taxed via the First Category Tax (FCT) levied at a tax rate of 24% in 2016 (in the case of taxpayers adhered to the totally integrated with income attribution tax regime, an income tax rate of 25% will apply from 2017 onwards; for taxpayers adhered to the partially integrated income tax system, a tax rate of 25.5% will apply in 2017 and 27% will apply from 2018 onwards). It applies to profits from any commercial activity whether the enterprise is a legal entity, a branch, a permanent establishment of a foreign company, sole proprietorship or an individual. The tax base is defined as total income less the costs and expenses required to produce it taking into account inflation adjustments. A loss incurred may be carried back and/or forward and deducted against profits without time limit. - It may also be offset against previous retained earnings in a kind of carry-back. Individuals and legal entities that are not resident or domiciled in Chile are generally taxed on any income derived from Chilean sources at a standard tax rate of 35% (lower rates apply for some types of income and are available under double taxation agreements). II.1. FRANCE The rates in Table II.1 include surcharges, but do not include the local business tax (Contribution économique territoriale, which replaced the former local business tax, the Taxe professionnelle from January 1st 2010), the 3 % additional contribution on distributed profits, the temporary surtax applied to 250 million (rate of 5% in 2011 and 2012 and 10,7% onwards) abolished in 2016, and the turnover-based solidarity tax (Contribution de Sociale de Solidarité sur les Sociétés). The Contribution Sociale de Solidarité sur les Sociétés is levied at a rate of 0.16% (0.13% plus a surcharge of 0.03%) of the turnover of companies, excluding VAT and is deductible for income tax purposes. [1] The standard corporate income tax rate is 33.33% [2]. It is increased by a 3.3% surcharge (Contribution Sociale sur les Bénéfices) for companies with a turnover of at least EUR 7,630,000 on the part of their liable tax payments in excess of EUR 763,000 - resulting in an effective tax rate of 34.43% for companies that have profits above EUR 2,289,000. Since 2011, many reforms have broadened the corporate tax base. The carry-back of losses has been reduced from three to one year and the carry-forward of losses limited to 60 % of the income above EUR 1 million taxable profit, and eventually to 50 % as from 2012. Furthermore, the deduction of net financial expenses has been limited to 85 % of net interest charges for [1] The French government has recently announced that both the temporary surtax and the turnover-based solidarity tax will be phased out by 2017 [2] The French government has recently announced that the standard corporate income tax rate will be gradually lowered to 28% by 2020, starting in 2017 5 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu 2012 and 2013 fiscal years (only when they exceed EUR 3 000 000) and 75 % since 2014. Finally, exemptions on capital gains on sale of affiliates have been reduced. The Contribution économique territoriale (CET) is composed of two separate taxes, the corporate property contribution (cotisation foncière des entreprises, or CFE) and the contribution for value added (cotisation sur la valeur ajoutée des entreprises, or CVAE). Like the former local business tax (the Taxe professionnelle, abolished in 2010), this tax applies to branches and subsidiaries established in France. The value added). The CFE is based on the value of owned or leased office premises. The productive investments are no longer taxed, as it was with the previous local business tax, i.e. equipment and movable property which include machines, tools, movable property and equipment. The CFE is calculated by multiplying the cadastral value of the premises by a certain coefficient, assessed annually by the local authorities. The local authorities also set the minimum contribution payable by the companies in their jurisdiction. The contribution for value added by businesses (CVAE) is assessed on the value added companies realize during the previous calendar year or the last 12-month financial year if this does not coincide with the calendar year. It applies to firms concerned by the CFE with turnover exceeding EUR 152,500. Only companies with annual pre-tax turnover of over EUR 500,000 must pay the CVAE, but all have to declare the value added created during the fiscal year. The CVAE rate is theoretically 1.5% for companies with an annual pre-tax turnover of over EUR 50 million. Below this amount, companies are subject to a reduced CVAE rate, adjusted according to the level of the company turnover. The assessed value added is itself capped, depending on the case, at 80% or 85% of t is below or above EUR 7,600,000). II.1. GERMANY The representative sub-central government corporate income tax rate is for Berlin. In the years between 2000 and 2007 this rate was 0.05 (general rate) * 410 % (local multiplier ( %. As the local business tax was deductible from its own base, the effective rate was 20.5 / 120.5 = 17 %. This implies that the effective central government corporate income tax rate in 2007 was 26.375 % * (1-0.17) = 21.9 %. The combined corporate income tax rate in 2007 was therefore 38.9 %, as it also was in 2006, 2005, 2004, 2002 and 2001. In 2003, the effective central government corporate income tax rate was 27.96 % * (1-0.17) = 23.2 % due to a temporary increase in the tax rate in order to finance the repair of the damages caused by the major floods in 2002. The combined corporate income tax rate in 2003 was therefore 40.2 %. In 2000, the effective central government corporate income tax rate was 42.2 % * (10.17) = 35 %. The combined corporate income tax rate was therefore 52 %. With the Corporate Tax Reform in 2008 the representative sub-central government corporate income tax rate was changed to 14.35 % (0.035 general rate * 410 % multiplier ( ). Local business tax is no longer deductible from its own base. The central government corporate income tax rate was reduced to 15 %. The combined corporate income tax rate is now at a level of 30.18 %. II.1. GREECE Corporate Taxation According to the Greek Income Tax Code in force, which was enacted with the Law 4172/2013 and replaced the previous Code (Law 2238/1994), the tax rate imposed on the worldwide income acquired by 6 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu legal persons and legal entities is 26%. This rate applies to income derived during the tax years beginning on or after 1.1.2014. For additional information concerning previous years, see explanatory notes for table II.4. According to the Law 4334/2015 (Art. 1), the corporate income tax rate was increased to 29%. This rate applies to profits derived during the tax years beginning on or after 1.1.2015. Legal persons and entities that are subject to CIT include: a. b. Private companies that were established in Greece or abroad (partnerships) and keep doubleentry books c. Non-profit legal persons governed by public or private law and established in Greece or abroad, that keep single-entry books, including all types of associations and foundations, except any income derived in pursuit of the fulfillment of their mission, which is not subject to tax, d. Cooperatives and Associations that keep double-entry books, e. Civil law societies, civil profit or non-profit companies, joint-stock or silent companies, that keep double-entry books, provided that they are engaged in business activities, f. Joint ventures that keep double-entry books g. Legal entities (as defined in Art. 2 of the Income Tax Code) that keep double-entry books and are not included in the previous cases. Profits from business activity derived by Agricultural Cooperatives and producer groups are subject to a 13% tax rate. The Law provides certain tax exemptions. For instance, the Greek State, the Bank of Greece, as well as the Holding Companies, the Undertakings for collective investment in transferable securities (UCITS) established in Greece or in another EU or EEA member-state and the Hellenic Republic Asset Development Fund are fully exempt from taxation.. Government bodies are only liable to tax in respect of income from capital and surplus from capital transactions. A special tax regime (tonnage tax) applies for the operation of ships under Greek flag. Additionally, tax exemption applies in any income derived in Greece by foreign legal persons or individuals according to the special provisions of a Double Taxation Convention or a Multilateral International Convention or reciprocity conditions (NATO, UN, diplomatic missions etc.). Distributed profits are subject to a withholding tax of 10%. In case of a parent-subsidiary relationship, dividend payments and profit distributions paid by subsidiary permanent establishment companies to their parent companies established in another EU Member-State shall be exempt from withholding tax provided that the conditions set forth in Art. 63 ITC are fulfilled (application of the EU Parent-Subsidiary Directive). Partnerships, joint ventures - other legal entities 7 ac .c tr om k lic C om k lic C .c re . . k e r- s o ft w a w w ac ww ww tr to to bu y N O W ! PD O W ! PD k e r- s o ft w a re F -X C h a n ge F -X C h a n ge N y bu (2000-2012) TAX RATES FOR LEGAL ENTITIES (except for those subject to corporate income taxation) Type of legal person Limited partnership (EE) & Unlimited general partnership (OE), Civil law communities Joint ventures, Civil companies, , Silent partnerships and Participation companies Legal services companies of L.518/89, Notary companies of L.284/93 1/1/2000 31/12/2004 1/1/200531/12/2005 1/1/200631/12/2006 1/1/200731/12/2007 1/1/2008 31/12/2009 1/1/201031/12/12 24% 22% 20% 20% 20% 35% 32% 29% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% Partnerships under the Greek Law may be either general or limited partnerships. From 2010 to 2012 the above mentioned tax rate of 20% was imposed on the profits relating to partners who were individuals, following the deduction of their entrepreneurial fee, whereas the profits corresponding to legal entities partners were taxed at a 25% rate. The Law 4110 /2013, as replaced by the Law 4172/2013 brought significant changes to the tax regime of partnerships, civil law societies, silent partnerships, participation companies, joint-ventures, legal services and notary companies, which from 1/1/2013 onwards are taxed with the following tax schedule: Partnerships, joint ventures Income bracket 50.000 Excess Tax rate (%) 26% and other legal entities keeping single entry accounting books (2013-2016) Tax bracket 13.000 Total amount of 50.000 13.000 33% The tax treatment of the legal entities that keep double-entry books is now aligned with that of corporations (SAs, LLCs and PCCs), which means that the total amount of their net profits is taxa ...
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