DECISION ANALYSIS:
Paul and his new business are taking off. He is doing great and cannot keep up with the growing demand for his products. His solution, is expansion, more food trucks.
In order to expand, Paul will need investors. Paul is considering three options:
1) Common Stock, $400,000 return in a good market; 100 % loss in a bad market
2) Preferred Stock, $200,000 return in a good market; 50% loss in a bad market
3) Corporate Bonds, $50,000 return in a good market, investors would be guaranteed $35,000 back in a bad market.
To limit the number of investors, Paul is going to sell the investments in blocks of $50,000 and the investor will need a net worth of $200,000. The current forecast is for inflation to be 2.5% per year for the next 5 years.
Paul is considering approaching his friends and past co-workers first before making the offer to the general public.
Paul’s friends and past co-workers
Doug Rough, a good friend of Paul’s. He is still currently working and looking for an investment. But, he is not sure of the success of the food truck expansion. He is seeing only a 20% chance of success.
Charlie Mark’s, a lodge brother of Paul’s, loves Paul’s cooking and thinks the expansion will be a great success.
Dan Moore, is retired. He is Paul’s father-in-law. He is very conservative and does not like risk at all. He will be investing in the food truck expansion.
Lisa Pennington, a neighbor of Paul’s is considering investing. She thinks the expansion has a great chance of success. Lisa is very conservative and tries to avoid risk in her investments.
Carrie Welch, is Paul’s sister. She is on the fence as to the success and failure of the expansion. She is considering investing.
Required:
1) Develop a chart for Paul showing the investment choices. Paul would like to use the chart as part of his presentation to each potential investor.