1. Your company is looking to provide a company car for its
president and needs to know which option, buy or lease, would
be the best financial decision.
Part I.
Design and create a workbook
in Excel
to compare the
purchase
versus
lease
of an automobile. The car
the company
wish
es
to purchase is $18,400.
M
onthly net income (after taxes) is $3,024. You need to decide
whether to lease the car over three years or buy the car with the
aid of a bank loan for $18,400. Design and create your solution
using Excel. Format your workbook attractively and
appropriately
based on
professional design
principles learned in this course
. You
must use proper functions and formulas for all calculations
.
Name the worksheet
Vehicle Purchase Analysis
.
Be sure your calculations

2. support your conclusions.
Save your file as
Exam III Item 1.
The following information is provided:
If the company was
to lease the vehicle with zero down, the lease payment would
be $355 per month. At the end of the three years, there is an
option to buy the vehicle for $12,000. What would be the total
cost to
own
the vehicle at the end of three years?
If the company was
to purchase the vehicle with the aid of a bank loan with zero
down for three years (inter
est rate is 7%), what would the
monthly payment
be? What would be the total cost to own the vehi
cle at the end of three years?
Ho
w much would the company
pay, over and above the price of the vehicle, for
each
option?

3. What do you recommend as the best
financial
alternative
: purchase or lease? W
hich
option
would you
recommend the company choose
and why?
What other factors
should be considered
in
the
decision
OTHER THAN cost
?
Create an attractive chart to illustrate your financial findings.
Be sure to use appropriate labels. Which chart type did you
choose and why?
Perform all analysis using Excel. Answer the questions within
your Excel workbook.
Part 2.
Amortization Schedule. Create a new worksheet within the
Exam III Item 1 file and name it
Amortization Schedule

4. . Assume the vehicle was purchased and the payback period was
3 years. Design and create an amortization schedule with a
column indicating the # of the payment (there will be a total of
36 payments), the remaining principal, the amount of the
payment applied to interest, the amount of the payment applied
to principal, and the total amount of the monthly payment (will
be consistent over the payback period). Use ppmt and ipmt
function for the payment and interest portion of each payment.
Save your file as
Exam III Item 1
.
Item 2 Data Tables and Scenarios
Rogers Party Planners
You are the sole proprietor of a small party planning company
that specializes in
small
community and company events
(average of 200 people per event)
.
You have one employee who you pay $200 per party. You are
also responsible for paying payroll taxes. You rent a small
storage unit which you use for storing party materials and
supplies.
You have to pay for liability insurance. Because of the
Seasonal Nature of Party planning, you may increase
advertising during specific seasons. The advertising expense is
based on an average throughout the year. The number of parties
per month is also an average throughout the year.

5. You are concerned that you might have cash flow issues during
slow months and want to analyze how the different seasons
may
affect
your income. You also want to see how increasing you’re
pricing during busy seasons may affect your income.
You are thinking about hiring a second employee and perhaps
taking on larger parties.
You decide to explore all these different avenues by using the
tools provided by Excel.
You are also considering purchasing or building a facility that
can be used for your events and parties.
Part 1.
Use the data file Rogers.xls. Add a documentation sheet with
author, date and purpose of workbook.
Create an Income Statement with the following data:
Enter formul
as to
calculate amount in cells with asterisks.
Rogers Party Planning Monthly Income Statement
Sales Information
Revenue per head for party

6. $15.00
Average size of party
200
Revenue per party
*
$
3,000.00
Number of Parties per Month
8
Average Revenue per Party
*
3,000.00
Total
Monthly
Revenue
*
$24,000.00
Variable Expenses

7. Average Material Cost per H
ead
7.17
Total Material Cost per Month
*
11,472.00
Payroll
per P
arty
430.00
Total
Payroll
per Month
*
3,440.00
Total Variable Expenses
*$
14,912.00
Fixed Expenses
Insurance
90.00
Rent

8. 800.00
Advertising
750.00
Total Fixed Expenses
* $
1,640.00
Summary
Total Monthly Revenue
*$
24,000.00
Total Monthly Expenses
*$
16,552.00
Gross
Monthly
Income
* $
7,448.00
Taxes (28%)
*
2,085.44

9. Net Monthly Income
*$ 5,362.56
In the same worksheet as your income statement, c
reate a
single
variable data table to analyze how
the net income per month would change based on the number of
parties per month.
Use the range of parties from 1 per month to 16
per month.
You can refer to the PDF and Word doc to check your table
results. These are posted in D2L
under the content area and named monthly income data table.
Create a CVP Chart using the results of your data table.
Save this in the same worksheet at your data table
and income statement. Format according to the rubric on the
last page of this exam
.
Use Goal Seek to determine the break-even point for Net
Income
(Net Income will be equal to zero)
with the current values for revenue and expenses by changing
the monthly

10. number of parties
. Indicate the solution in the documentation worksheet
labeled: Break-Even Point Sales by
Party Size.
Please note the breakeven point in the documentation
worksheet, and return the income statement back to the original
values. Note that your data table should return to the original
values as well.
d.)
Create the following four scenarios based on the Create a
Scenario Summary with Total Monthly Revenue, Total Monthly
Expenses and Net Monthly Income as the results cells. Please
also name the Total Monthly Revenue, Total Monthly Expenses
and Net Monthly Income cells accordingly.
Name the cells used as changing cells and results cell in the
scenario summary so that their names (and not the cell
reference) will appear in the
scenario
summary.
Use the names, Size of Party, Number of Employees, Number of
Parties, and Price per Head.
Save the summary worksheet as Alternative Scenarios.
S
et up four scenarios as follows: (use these names for each of the
scenarios)
1) Average
Operations
(Status Quo)

11. 2)
Reduced Number of Parties, Normal Price
3)
Larger Parties, Additional Employee
4)
More Parties, Additional Employee, Increased Pricing
1
2
3
4
Size of Party
200
200
350
400
Nu
mber of Employees(Payroll Per Party)
430
430
860
860
Number of
Parties
8
5
8
15
Price per Head

12. 15
15
15
20
If you get the following message click OK:
Which Scenario do you recommend and why?
Include your recommendations in the scenario summary
worksheet.
Part 2.
Loan Analysis Scenario
As another scenario you are considering
building
a facility in which you could hold parties and receptions.
After researching your options, y
ou
realized that you
would need to take out
a loan for $500,000
, which you
would like to
repay over a ten year period. This includes kitchen equipment,

13. furniture, and additional licensures.
The
kitchen equipment and furniture will cost you 25% of your total
investment.
The current interest rate is the prime rate plus 3%. The prime
rate is currently 3.25%
, this means your annual interest rate would be 6.25%.
You will use
Straight Line Depreciation over a 6 year period to determine
the cost of your depreciation.
The estimated salvage value of your equipment is $75,000.
C
reate a Loan An
alysis worksheet, Depreciation W
orksheet,
and
New Income S
tatements, using the following information
:
1. What would your monthly payments be under the above
scenario
?
2. What is the future value of your loan after five years
assuming you pay $2,500 per month?

14. 3. How many total payments would it take to pay off this loan
in years if you pay $3,000 per month?
4. How much could you borrow if you w
anted to pay $3,000 per month over
a 10 year period?
a.)
Analysis
Do any of these
scenarios
seem feasible given your estimated monthly net income?
Determine how depreciation affects your net income and cash
flow? Remember dep
reciation is an expense, but it is a
non-cash expense
that you can add
back in to increase your cash flow.
Hint: see tutorial 9.
Another
hint regarding depreciation and the income statements: you
want to create a new income statement under each loan scenario
and make sure to include depreciation The amount that you will
use for depreciation is going to be 25% of $500,000 with a
salvage value of $75,000.

15. What are some other considerations to take into account if you
wish to own your facility? How might that affect your
analysis?
Please save your responses to
t
his section a.), b.) and c.) to a worksheet named Solver Model.
b.)
Interpreting Solver Models
Using the solver model b
elow, identify
a. The current value of the objective cell
b. Number of changing cells in the model
c
.
Logical values and whether or not the current constraints have
been met
d. The arrays that are saved in the solver model and what the
iterative Process is

16. Maximum Net Income Model
$9,903.00
4
TRUE
TRUE
TRUE
TRUE
32767
0
Minimum Material Expenses
69,874.00
4
TRUE
TRUE
TRUE
TRUE
32767
0
c.)
Please define the following terms regarding Solver Reports and
how they may be used in analyzing your party planning
business.
1. Binding and non
-
binding constraints

17. 2. Slack