1 2 3 The Sharks gave you the $1,000,000 in funding you requested in exchange for 25% ownership of your company's profits. All the following are complete by March 31, 20x3: 1) your shark funding has been received, 2) new capital investments have been purchased and set up, and 3) additional labor has been hired and SELLING & ADMINISTRATIVE EXPENSE: Use a 3-year average Percent-of-Sales to forecast S&A expenses. (HINT: Find what percent S&A expense is for each of 20x0, 20x1, and 20x2, and average the 3 results together. Use the resulting average S&A Percent-of-Sales to forecast S&A into the future.) 4 RENT EXPENSE Rent expense is a fixed cost in the amount of $15,000 per year in 20x0-20x2, increasing to $200,000 per year in 20x3 5 6 7 8 " 10 11 12 13 14 15 16 17 18 19 20 21 DEPRECIATION EXPENSE: Depreciation expense is a fixed cost in the amount of 10% of Plant & Equipment each year. INTEREST EXPENSE: This is a fixed cost, and is 10% of Long-term Liabilities. TAXES: Because you live in a business-friendly State (Florida), you don't have to pay state taxes on your LLC's income. You do, however, still have to pay Federal taxes. Also, in 2002, higher tax rates were passed for the 2003 tax year, pushing income over $400,000 into the 39.6% tax bracket. Because of this, use 36% as your effective tax rate. (NOTE: If the taxes shown for 20X0-20x2 seem high, it's because you had income from another job that threw your LLC income into a slightly higher tax bracket. However, you'll quit that job if the Sharks fund SHARES: Issued 26,000 $1-par shares to the sharks for a 25% ownership stake. CASH: Increases to $50,000 in 2013 and stays at that level. MARKETABLE SECURITIES: Plan to keep Marketable Securities at 60% of Cash levels. ACCOUNTS RECEIVABLE: Use a 3-year average Receivables Turnover ratio to forecast. INVENTORY: Compute a 3-year average of inventory as a Percent-of-Sales, and then use that figure to forecast inventory levels through 20x7. PLANT & EQUIPMENT: There is a new capital expenditure of $750,000 dollars in 2003, paid for from the $1M in funding from the Sharks, rather than with new debt. (All capital expenditures are assumed to occur on January 1st of the year of purchase, and no equipment is sold or salvaged during the ACCUMULATED DEPRECIATION: Each year, 10% of the total amount of Plant and Equipment is added to the depreciation amount. ACCOUNTS PAYABLE: Use the 3-year average Current Ratio to forecast. (HINT: The Current Ratio will help you forecast TOTAL Current Liabilities, not Accounts Payable. Find Total Current Liabilities and Accrued Expenses first, and then you can solve for Accounts Payable.) ACCRUED EXPENSES: Use the 3-year average Percent-of-Sales method to forecast. LONG-TERM LIABILITIES: Pay down $100,000 of old debt every year starting in 20x3. COMMON STOCK ($1 Park: Increase by the dollar value of shares issued to Sharks (26,000 shares at $1 park CAPITAL PAID IN EXCESS OF PAR: The Shark's full investment of S1M must be reflected on the Balance Sheet. The stock received by the Shark, worth $26,000 (at Par value of $1 per share), is already reflected under Common Stock. The rest of the shark's investment value is added to this account. RETAINED EARNINGS: This amount is whatever it takes to make the Balance Sheet balance! (HINT: Remember Total Liabilities + Stockholder's Equity is equal to Total Assets. Once Total L+SE is determined, Total SE can be solved. Finally, once Total SE is solved, Retained Earnings can be solved.) DIVIDENDS: You do not pay dividends now and do not plan to while in a growth stage. Fill in the yellow highlighted cells with your forecasted figures. SHOW ALL YOUR SUPPORTING CALCULATIONS! You may do this either within the cell by using formulas, out to the right, or both -- clearly labeling your work. All your work must be shown on this sheet, not on a separate tab. Forecasted Income Statement (20 points: 5 for showing work, 15 for accuracy) 20X0 20X1 CLEAN JET PRODUCTS, LLC Pro forma Income Statement 20x2 20x3 20X4 20X5 20X6 20X7 Sales (all on credit) 1,200,000 Cost of Goods Sold (800,000) Gross Profit 400,000 1,500,000 (1,040,000) 460,000 1,875,000 Selling and Administrative Expense (224,900) (270,500) Rent Expense (15,000) Depreciation Expense (65,000) Operating profit (EBIT) 95,100 Interest expense (35,000) (15,000) (76,500) 98,000 (45,000) (1,105,000) 770,000 (363,700) (15,000) (139,000) 5,625,000 (3,093,750) 2,531,250 #REF! (200,000) #REF! 7,031,250 8,789,063 10,986,328 (3,867,188) (4,833,984) (6,042,480) 3,164,063 3,955,078 4,943,848 #REF! #REF! 13,732,910 (7,553,101) 6,179,810 #REF! (200,000) (200,000) (200,000) (200,000) #REF! #REF! WREF! WREF! WREF! 252,300 #REF! #REF! #REF! #REF! #REF! (85,000) #REF! #REF! #REF! #REFI #REF! Net Income before Taxes 60,100 Taxes Net Income (36,900) 23,200 Shares 60,000 Earnings per Share $0.39 53,000 (49,200) 3,800 60,000 $0.26 167,300 (55,600) #REF! 111,700 #REF! 78,000 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! 104,000 104,000 104,000 104,000 104,000 $2.38 WREF! MREF! #REF! WREF! WREF!