I need help explaning the quehstion and showing it step by step 4. Selling expenses are expected to be about 12 percent of sales and Sue is expecting to undertake extensivemarketing and promotion efforts throughout Texas after the business is opened. It is expected that theseadditional promotional expenses will be about $50,000 in 2013 only. Santa Fe Trading Company, Santa Fe, New Mexico(Adapted from Problem 1, Chapter 11 in Bank Management, 6th ed. By T.W. Koch and S. Scott Macdonald)Summer is approaching and Steven and Sue Mahon have finally decided that their idea of a successful furniture, art,and jewelry trading company has come of age. They know that summer is a popular tourist time in New Mexico andcould be the best time to start this new business. The Mahons have had a long time interest in Southwestern art andfurniture. Steven graduated from college with an economics degree about 15 years ago and received his MBA infinance a few years later. He has been working in Dallas, Texas, as the controller of a major wholesale distributorcompany for many years. His wife, Sue, who will be a full time partner in the business, spent the first ten years of hercareer in retail sales. Over the last several years she has assumed more administrative duties for the group she workswith.Steven and Sue know they bring the expertise and skill to run a successful business, but to ensure success theyhave been researching the market for over five years. They also know that they must be very careful and thoroughlyresearch the business and industry they are pursuing. They have traveled extensively to New Mexico and have spenta good deal of time getting to know the local artists (primarily ski bums). They have found that there is a greatdemand for Southwestern furniture in Texas and the Southwest, and prices are high. Through their contacts with thelocal craftspeople they have found that many of them would like a reliable source to display and sell their goods.They have been able to make tentative arrangements with a large and dependable group to supply the furniture andart pieces they will need to run the business.The Mahons have decided to open a shop called Santa Fe Trading Company in Santa Fe, New Mexico, and act asboth a retailer and supplier to furniture and art outlets in Texas. Steven's extensive contacts with businesses in Dallasand Houston have given him the orders needed to make the business a success as soon as they begin shipping thegoods. Sue has already begun marketing the Southwestern products. Santa Fe Trading Company's arrangements withthe local crafts people will allow very aggressive pricing of the goods to retail establishments in Texas. This aggressivepricing have been well received and tentative orders are already in place.Steven has found an ideal location in Santa Fe that is currently available. The owner was asking $475,000 for thespace, but company just signed a contract, contingent on financing, for $400,000. Steven and Sue have gotten bids onremodeling and should be able to renovate the space for about $90,000. Although they will purchase the building, theland is leased on a transferable lease with 65 years remaining. The Mahons have decided to invest $350,000, whichrepresents most of their savings, into the venture. Sue's sister is also interested in the possibilities that the companyexhibits and is lending Santa Fe $150,000. Repayment on the note to Sue's sister is not expected to begin for fiveyears. They have estimated that they will need $200,000 in inventory to start the business and they will buy theinventory in cash to build goodwill with the local craftspeople. They also estimate that they will need to maintain$30,000 in cash to conduct day-to-day operations and for bill payments.Wanting to use a local bank, Steven has approached Cary Marmer, the senior loan officer at Santa Fe NationalBank in Santa Fe, New Mexico, for financing. Steven's background in finance has allowed him to put together thefollowing assumptions for their preliminary business plan. Steven believes that all renovations to the building andinventory can be in place by the end of June 2013.

Background: The scenario presented is a case study about a couple, Steven and Sue Mahon, who have…

I need help explaning the quehstion and showing it step by step 4. Selling expenses are expected to be about 12 percent of sales and Sue is expecting to undertake extensive marketing and promotion efforts throughout Texas after the business is opened. It is expected that these additional promotional expenses will be about $50,000 in 2013 only.

I need help explaning the quehstion and showing it step by step 4. Selling expenses are expected to be about 12 percent of sales and Sue is expecting to undertake extensive marketing and promotion efforts throughout Texas after the business is opened. It is expected that these additional promotional expenses will be about $50,000 in 2013 only.

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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