Pm 598 Case Study
PM598
The Award Phase - You Decide
Unfortunately the catering business did not generate the expected profits therefore you are in the process of dissolving the business. You have no use for the high quality cooking equipment that was leased for the catering business. You assume the chefs will continue in the cooking business and can use the equipment. It would be all right with you if they took over the lease. You understand there is no charge to remove your names from the lease agreement. However, you think the best all around solution is to terminate the lease for the kitchen equipment.
You also do not think that the chefs deserve the capital because they caused the business to fail. You need to recoup as much as your investment as possible to open an alternative venture. You recently began to look at the possibility of opening a flower shop, although you have not yet done extensive planning for it. To do so you need capital.
How will we split the $15,000 left in the investment?
To be fair to our partners we will use the same capital distribution that was used at the beginning of the investment, Chris and Pat Smith, put $25,000 and the chefs put $10,000 up to total $35,000 for 100% of the shares. Each share is worth $350, therefore we own 55.5% of the company while the chefs own $45.5%.
We are down to $15,000 in working capital, which has to be split amongst the partnership. If we split this capital according to the ownership percentage, we should receive $8,325 and the chefs should receive $6,675. We do not think the chefs deserve this share because they caused the business to fail due to elaborate high-cost dishes being sold at a low-price. Also we will need capital for our new flower shop venture; therefore we will give the chef’s $3,000 and keep the remaining $12,000. As negotiation leverage we will use the kitchen equipment lease agreement options. We cannot use the kitchen equipment in our flower shop, but it could be useful for the chefs to
The Award Phase - You Decide
Unfortunately the catering business did not generate the expected profits therefore you are in the process of dissolving the business. You have no use for the high quality cooking equipment that was leased for the catering business. You assume the chefs will continue in the cooking business and can use the equipment. It would be all right with you if they took over the lease. You understand there is no charge to remove your names from the lease agreement. However, you think the best all around solution is to terminate the lease for the kitchen equipment.
You also do not think that the chefs deserve the capital because they caused the business to fail. You need to recoup as much as your investment as possible to open an alternative venture. You recently began to look at the possibility of opening a flower shop, although you have not yet done extensive planning for it. To do so you need capital.
How will we split the $15,000 left in the investment?
To be fair to our partners we will use the same capital distribution that was used at the beginning of the investment, Chris and Pat Smith, put $25,000 and the chefs put $10,000 up to total $35,000 for 100% of the shares. Each share is worth $350, therefore we own 55.5% of the company while the chefs own $45.5%.
We are down to $15,000 in working capital, which has to be split amongst the partnership. If we split this capital according to the ownership percentage, we should receive $8,325 and the chefs should receive $6,675. We do not think the chefs deserve this share because they caused the business to fail due to elaborate high-cost dishes being sold at a low-price. Also we will need capital for our new flower shop venture; therefore we will give the chef’s $3,000 and keep the remaining $12,000. As negotiation leverage we will use the kitchen equipment lease agreement options. We cannot use the kitchen equipment in our flower shop, but it could be useful for the chefs to