If you receive a windfall of cash (such as a tax refund or collection of a debt from a friend), you may face a common dilemma: Invest, pay off debt, or spend. (Spending is not considered as an option here.) If better personal budgeting has helped you save an additional amount every month, a debt repayment plan may be preferable to saving until most of the debt is gone.

Generally, paying off or paying down a debt that has a higher interest rate is preferable to making an investment that earns a lower interest rate or rate of return. To make a fair comparison, you need to calculate the after-tax interest rate on your debt and investments. If your investment is not held in an interest-earning account (such as a money market or savings account, CD, or money market mutual fund), calculate the investment’s after-tax return.

If you are paying off a credit card or auto loan, you can use the APR as the effective interest rate if available, or use the stated interest rate for sake of simplicity. If you are paying off a mortgage, home equity loan, or student loan, start by subtracting your income tax bracket from 1.0.

For example, if you are in the 25% tax bracket for 2004, you would have 0.75 (1.0-0.25). Then, multiply 0.75 by the loan interest rate. The result is your after-tax interest rate on tax-deductible debt. If you have a mortgage loan of 8% and are in the 25% tax bracket, your after-tax interest rate is 6%.

If you plan to invest in a stock, bond, or mutual fund that invests in any of these types of securities, you should have an idea of the investment’s expected return. For example, if you invest in a mutual fund that earns an annual rate of return of 10%, you may decide to use that return as your expected return. Use the same calculation rule to calculate the after-tax return on investment (which is based on expected return).

You should calculate the after-tax interest rate or return for investments held in taxable accounts. For example, if a taxable investment earns a 10% return and you are in the 25% tax bracket, your after-tax return is 7.5% [(1.0-0.25)*.10]. (Investments in tax-advantaged accounts are not taxed until you begin to take money out, which generally occurs after you retire. If using a tax-advantaged account, the interest rate earned on the account is equal to the after-tax rate to keep things simpler.)

In most cases, the APR on your credit card debt or an auto loan is higher than the after-tax interest rate or after-tax return on an investment. These types of consumer debt—particularly credit card debt, since it is unsecured credit are among the most expensive. As a result, paying off a credit card is almost always a better deal than investing. While some investors use their credit cards to raise funds for speculative investing, this kind of leveraging is an extremely risky practice and should be avoided.

Paying off debt is sometimes a painful experience. Not only do you miss a chance to spend, you also pass opportunities to save or invest. However, if you’ve improved your budgeting efforts and have been able to save extra money, you will improve your personal cash flow further by paying off high-interest debt. The basic relationship pay off debt that has a higher interest rate than what you earn on your investments is a practical step in the right direction.

The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.

Generational Equity Announces Acquisition of Transparent and Optical Spinel Technology from Technology Assessment & Transfer Inc.

Generational Equity, an advisor to privately held and family-owned businesses for mergers, acquisitions, and strategic growth initiatives, announced the sale of the exclusive world-wide right to manufacture Spinel Transparent Products by its client, Technology & Assessment Transfer, Inc. (TA&T) based in Annapolis, Maryland to ArmorLine Corporation of Charlotte, North Carolina.

Technology Assessment and Transfer (TA&T) develops and commercializes advanced materials for defense, aerospace, bio-medical, and industrial applications, primarily through government funded research and development (R&D). TA&T is the industry leader in the research and development of magnesium aluminate (Spinel) transparent armor and optical system components for a wide variety of end use applications. Exceptional wide-band transparency (UV through the mid IR), high hardness, dielectric, and ballistic properties make Spinel an attractive choice for electro-optical sensors, laser-RF communications, and vehicular and aircraft ballistic protection.

ArmorLine Corporation is a global provider of armor, personal protection, and specialized security products. ArmorLine products are currently protecting critical assets in some of the world’s most hostile threat environments.

The sale of the exclusive world-wide right to manufacture Spinel Transparent Products by TA&T to ArmorLine Corporation will diversify ArmorLine’s product portfolio given Spinel’s improved ballistic and rock-strike performance and resistance to sand abrasion. Spinel transparent armor also offers 50-60% weight savings and reduced thickness over traditional ballistic glass. Armor weight and thickness reductions are critical for performance of armored vehicles, fixed and rotary wing aircraft. Commercial markets for transparent Spinel include aircraft, train, bar code scanners, watch crystals, cell phone and PDA devices due to its excellent abrasion resistance and light transmission properties.

About Generational Equity
Generational Equity is one of the nation’s leading middle-market mergers and acquisitions companies, providing private business owners with the information and expertise they require to exit their business successfully. A unique, four-phase approach that includes education, financial analysis and reporting, sales documentation and deal-making ability combine to offer business owners an unparalleled level of commitment and experience, all focused on helping to release the generational equity and wealth in every business.

Generational Equity has more than 300 professional and affiliates nationwide and is headquartered in Dallas, with affiliate offices in New York, Chicago and Irvine, Calif. For more information, contact Generational Equity at 877-213-1792 or info-us@genequityco.com, or visit www.genequityco.com.

How do you determine the value of a business during the selling process by Generational Equity

• The initial step to selling a business involves a thorough and accurate business assessment which includes a valuation analysis.

• Common methods for valuing a business include public market comparable analysis, identifying precedent M&A transactions, discounted cash flow analysis, book or asset based valuation approaches and applying multiples to revenue, EBITDA or net income.

• Many formulas and “rules of thumb” have been developed to arrive at a “ballpark” estimation of value, but it takes seasoned expertise to look beyond mere formulas and determine a real measure of value.

Don’t leave money on the table by neglecting the intangible value of a business.

• At a minimum, a buyer ought to be willing to pay the baseline intrinsic value of a business.

• In many cases, however, sellers forego the opportunity to obtain appropriate compensation for the intangible value of the business. This is caused by the inability of inexperienced sellers to properly substantiate, support and quantify the intangible value of their business.

• Employing proper valuation methodologies and techniques can help sellers maximize value. It is also important to recast historical financial statements in order to show the effect the purchase of the business will have on the buyer’s financial results.

How can the value of a business be increased?

• Prepare concise, detailed and comprehensive information regarding the business.
• Apply sound market analysis and research to support financial projections.
• Define the intangible and future benefits of the business and the potential synergies of a pro forma combination.
• Identify and approach the right buyers.
• Conduct a structured, competitive sales process.
• Structure and negotiate a deal on the seller’s terms.

Generational Equity knows exactly what it takes to drive premium value for your business.

• With decades of results and countless experience, Generational Equity’s representatives can effectively position your company in the marketplace and avoid the valuation pitfalls that can underestimate the value of your business.

Generational Equity and its professionals have worked with Middle Market business owners who are contemplating a sale or seeking merger and acquisition opportunities. We assist owners in all areas of stock or asset sales, mergers, or divestitures. Our highly experienced Merger and Acquisition specialists provide insight and strategies on such matters as: When is the right time to sell? Should all or part of the business be sold? Is the company ready for sale, or should the focus be on building value for a future sale?

For most Middle Market business owners the sale or other transition of a business is the single most important, and perhaps the largest, financial event that occurs in the life of the owner. Most Middle Market business owners do not have an exit strategy. Selling at the wrong time or without the right information can substantially lower the value of the business.

Generational Equity regularly conduct informational one-day conferences that provide business owners with an overview of the process necessary to successfully sell a private middle market business for maximum value. The information presented in the conference will be a vital part of a strategy to ultimately sell your business for the highest possible price.

Generational Equity’s seasoned M&A professionals can help the business owner anticipate challenges and understand what needs to be done at every juncture of a transaction. For each business owner, we can prepare a customized marketing strategy that presents the business to the most appropriate potential buyers while maintaining strict Client confidentiality.

Generational Equity also has access to thousands of buyers who are actively seeking to acquire middle-market companies.

Generational Equity provides the following services:

Mergers & Acquisitions
International M&A Team
Strategic acquisitions
Management buyouts
Divestiture strategies
Structuring & negotiating transactions

Financial Opinions
Fairness opinions
Valuation opinions
Estate & gift tax
Litigation support

Advisory Services
Exit strategy planning
Preparation of selling memoranda
Coordinating closing related activity
Identify potential buyers and acquisition targets