How much sales revenue and net income would you expect Police Prep to have in the next fiscal year (i.e., from July, 2003 to June, 2004; see Exhibit 5 on pg. 15. Note that Exhibit 5 covers 1 year with the first column reporting 6 months data from July-Dec 02’ and the next two columns reporting data on the quarterly basis for Jan-Mar 03’ and Apr-Jun 03’)? If you don’t know what EBITDA stands for, please see:

The income statement of the police prep for the next fiscal year is mentioned below in table:

Question: 2

What are some common methods or ways to place a value on a business that is being sold (Hint: May want to reference reading materials I handed out for this week)? What do you think is the best method to use in obtaining a value for PolicePrep? Why?

        There are common methods and ways to place value in a business that is sold. The best way to add value in the police prep is to increase the goodwill of the business and to consider the value of the stakeholders in the corporate level decisions of the business. Corporate social responsibility and value of the shareholders should be the prime concern of the Police Prep administration while taking the decision towards the operations of the business. Police prep business is directly concerned with society therefore when they will market their business as the environment supporting business and will give value to the stakeholders, they will definitely build a positive image in the market.

Question: 3

Approximately how much do you think Police Prep would be worth at this time? Please explain how you determined this value.

        The current worth of the business is estimated from the balance sheet and income statement of the business. In accordance with the income statement revenue stream (an indicator of the business worth) of the business was 22086 last year (in 2002) but in 2003 it is $66764. While the company has the tangible and intangible assets with the worth of 21491. While the net worth of the business is 20955.

Question: 4

How much potential do you think that PolicePrep has to grow and become profitable over the next few years? What do you think are likely ‘worst-case’ and ‘best-case’ outcomes for PolicePrep? Please explain your answers.

        In accordance to calculations, the profitability of the business is growing with the time. While at the same time the external environment as requirements and competition is also changing. Therefore the business should focus more on profitability and marketing. They need to grow with full potential. The worst case outcomes for the business are the decrease in the equity of the business because of the decrease in profitability. While the best case for the business is the expansion of the revenue by the increase in sales.

Question: 5

What do you think Jessop should do? Would you recommend that he get a full-time job and treat Police Prep as a part-time hobby, work full-time in the business and ask his 2 partners to directly compensate him, or attempt to ‘buy out’ his partners to become sole owner of this business. Please explain your answer.

        The Jessop should personally work as the full-time job at the business if management of the business is not capable to deal the matter efficiently. Business is at growth stage that requires full attention to enter in maturity stage. He can buy out his partners to become the sole owner of this business if things go out of control. However, I will highly recommend that Jessop should stay with the business as he knows the business well and has potential and capabilities to expand the business.