Assignment+Two - Management C31 Summer Term 2010 Assignment...

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Management – C31 Summer Term, 2010 Assignment Two The Case Camilla Buto recently graduated from university where she studied commerce. She intended to seek work in the financial sector but she had the unexpected chance to do something different with her career. Her parents owned and ran a fairly profitable neighbourhood grocery store where Camilla had worked part-time for a number of years. They expressed a desire to retire and move to Florida, but also wanted to keep the store in the family. They suggested that Camilla might buy the store from them, and they’d find a way to make it work so that she could. The value of the store was reliably found to be about $700,000. Camilla’s parents offered to sell it to her for $500,000, confident in her ability to obtain financing at this price. Banks were very reluctant to lend so much money to a young woman with no credit history, however, and she was only able to obtain a loan for $200,000. Her parents suggested that the remaining $300,000 could be paid out of profits each year until it was cleared, with either half of profits going to them or else “whatever Camilla could afford.” Camilla gladly agreed and they shook hands over it. Camilla definitely has her own ideas about how to run the business now that it’s hers, and renovations are the first thing on her list. She found a small local contractor named John Pierce and inquired about the cost of installing a sandwich and pasta bar and also general renovations of the interior. John was thrilled to have a job of this size but he admitted he’d never renovated the interior of a grocery store before. He suggested the total cost of the project should be about $50,000 but he wasn’t sure about the cost of materials. He asked that Camilla promise to cover any cost overruns, if the price of materials should be more than $30,000. She said she could do this, but in return she asked John to promise the job could be complete in two weeks. John said he needed some time to think about this and to check his schedule. The next day he called to inform Camilla he was accepting her terms. At this point Camilla said she had thought twice about the costs
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This note was uploaded on 05/05/2011 for the course MGT C31 taught by Professor Rybak during the Winter '11 term at University of Toronto.

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Assignment+Two - Management C31 Summer Term 2010 Assignment...

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