Assume Investor Makes an Investment of $1 million into your operations, with the following requirements

Investor gets his $1million back first, a 10% 'bonus' then splits everything thereafter 50/50.

Consider this a $1 million in preferred sotck with a 10% dividend required.

You should calculate the one year based on this investor exiting; that is, for preferred position

Investor gets his 10% dividend, then the preferred issued is paid back, then investor shares in common distributions.

What would the difference in your cash flow be if you "sold" the investor on putting the investment

in the form or $1 million in senior debt, with a 10% interest rate, then splitting 50/50.

(Note, all assets are pledge to investor until all returns are paid back; entrepreneur cannot take any other cash out of company)

Assume no Cap Ex required.

No Debt W/ Debt

Revenues 3,500,000 Revenues

COGS 25% 875,000 COGS 25%

Op margin 2,625,000 Op margin

SG&A 85,000 SG&A

Depreciation 350,000 Depreciation

Int Expense - Int Expense

Gross Profit 2,190,000 Gross Profit

Taxes 30% 657,000 Taxes 30%

Net Income 1,533,000 Net Income