Bowers accumulated information on upscale retail garden stores from a number of sources, talked to suppliers, looked at potential

locations, and established a banking relationship with the Campbell National Bank. She wanted to make sure that she had enough money to get the

businessoff to a good start. Mary Jane had heard stories about many small businesses that failed because theywere undercapitalized.

After careful study and analysis, Mary Jane made the following projections for the first yearof operations of the Garden Place, Inc.:

April $1,2006-$The business would be incorporated, and Mary Jane and John would invest

$$60,000$ in the company in exchange for shares of common stock.

April $1,2006-$The Campbell National Bank would loan Garden Place, Inc., $$32,000$ to berepaid in equal principal payments over four

years. The interest rate was $13\%,$ and interestwas payable at the end of each year when the principal payment was made.

April $1,2006-$A pickup truck would be purchased for $$12,000,$ of which $$10,000$ would befinanced by the Campbell National Bank. The

loan would be repaid over three years at therate of $$336$ per month for a total of $$12,100.$

April $1,2006-$Display equipment would be purchased for $$6,000$ cash

April $1,2006-$A Rototiller would be purchased for $$400$ cash.

April $1,2006-$A cash register would be purchased for $$3,600$ cash.

April $1,2006$An inventory of plants, trees, and shrubs would be purchased for $$60,000$ cash.

The following things were projected to occur between April $1,2006,$ and March $31,2007$ :

Additional purchase of plants, trees, and shrubs: $$200,000.$ Mary Jane planned to price allitems to give her a $40\%$ gross margin, which is

to say that if anitem cost $$6,$ it would be soldfor $$10.$

Advertising expenses would be a percentage of sales, or $$20,000$ for the year.

Mary Jane categorized a group of business expenses as ongoing. They were forecast as follows:

Rent: per month$)$ Telephone:

$$1,200($ $$100$ per month$)$ Utilities: $$4,800($ $$400$ per

month$)$

Payroll: $$112,000($ $$40,000$ for Mary Jane and $$72,000$ for three regular and four part$-$

time employees$)$

Monthly payments of $$336$ would be made on the $$10,000$ truck loan.

A principal payment of $$8,000$ would be made on the $$32,000$ bank loan, along with interestof $$4,160.$

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