What should Alison and Vanya consider, discuss, and do to have a successful business partnership?
ENT4305
Midterm:
This exam must be turned in to by Thursday, October 8, 2020 by 10:30 a.m. (EST).
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This exam is worth a total of 450 points or 45% of your final grade. Points given
per question are listed next to each exam question. Exam questions with more
points should generally have longer answers. If not enough information is
provided for you to answer a question, then please explain what information is
missing and why you need it to answer the exam question.
Exam Fact Pattern & Questions
Alison Hargreeves currently works for her father, Reginald Hargreeves, in an
umbrella store. Alison has been talking to her sister, Vanya, who is a violinist and
loves music. As a result of these talks, Alison is now inspired to open a music
store where she plans to sell musical instruments, sheet music, and musical
accessories like music stands and metronomes. She also plans to sell musicinspired swag like bags, hats, t-shirts, and umbrellas. You could say that the
entire idea and concept for the store came from Vanya.
Alison has crunched the numbers and she believes it will cost her about $50,000
to get the store up and running. Alison has $10,000 saved and plans to invest the
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money into the store. Vanya loves Alison’s vision for the store and wants to
invest $25,000 in the store so she can be an equal partner. Alison is not sure
whether she wants to have Vanya be involved in the day-to-day management of
the store because Vanya can sometimes get on her nerves. Alison’s father has
repeatedly offered to loan Alison money up to $50,000 if she wants to start her
own business so Alison is thinking about taking her dad up on his offer and ask
him to loan her $15,000 to $40,000 depending on what she needs. Alison’s father
said he would loan the money with a 1% interest rate and 20 years to repay the
loan which is more favorable than any bank.
1)What should Alison consider before she quits working for her
dad at the umbrella store and how should she quit?
2)Which business entity should Alison choose for her music store
and why? Be sure to discuss at least 4 types of business entities and
explain the pros and cons of these entities as they relate to Alison’s music
store.
3) What should Alison and Vanya consider, discuss, and do to have
a successful business partnership?
4) Discuss the advantages and disadvantages to Alison regarding
the following 4 scenarios as well as the likelihood of each scenario being
successful.
a) Using her own $10,000; accepting Vanya’s $25,000 investment into her
business; and her father’s $15,000 loan to fund her business;
b) Using $50,000 from an angel investor to fund her business;
c) Using her own $10,000 and taking out a $40,000 loan from a local bank;
and
d) Using $50,000 from a venture capital firm to fund her business.
