Advance Fuel Corporation Case

4701 Words Oct 27th, 2012 19 Pages
Advanced Fuels Corporations
Financial Analysis and Forecasting

Wai Wai Yung
Wing Man Tsoi

Introduction:

Advanced Fuels Corporation (AFC) was founded five years ago by Dr. Zachary Aplin. In the fourth year of research he and his two –member staff made a major break-through that can convert grain waste products into ethanol which can mix with gasoline to produce a better burning automobile fuel. Producing ethanol from waste products would lower its cost dramatically so the market potential of the blended fuel would be increased. After AFC receiving a patent for Dr. Aplin’s unique ethanol production process he decided to broaden the scope of operations of the company but he doesn’t have additional funds to put in. So, he developed a
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In AFC’s business plan, it stated the company is building production facilities in five major cities in U.S. and also the patent of unique ethanol production process can be collateral too. In AFC’s condition they need to get the operation started so a bridging loan (short-term) is most suitable for them until they find a permanent investor to provide the additional funds needed and it carries relatively lower risk for our bank as well.

We would prepare a few things before meeting with Dr. Aplin and his consultant. First, study the business plan of AFC carefully to see if the proposal is feasible and reliable. Look at all the components with the current and future economic condition, trend of the industry and related news to see if everything is reasonable. When everything looks good from the surface, the next step is to conduct a detail research on Dr. Aplin and his company and the industry. Dr. Aplin’s personal information such as reputation, education and achievements can tell us the ability of him to support his new firm and to conduct the business. Studying about his company’s details like financial statements and how the operation goes can get us close to the most important part—compare the firm with some established companies within its area of industry. From that we can estimate the risk of the business, the return, cash flow, payback period, competitiveness…

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