D 0 P B Capstick Muffler 12-Month Cash Flow Paned Beginning Pened Ending 191 11/01 W121 1/1/20 771521 10/10 11/1991 12/01 1/1992 11:20 4110 Cash Beginning of Pend Cash End of Period 0 0 0 0 0 0 0 0 0 0 Jan 20 Jun 1 Jul 31 Aug 91 Sep31 OCES1 Nov1 Dec91 Jan 92 Feb 2 Mar 20 Apr 20 Operations Cash receipts from Customers omer operations Cash paid for Inventory purchases Coneral operating and Advertisement wage expenses Depreciation Income Net Cash Flow from Operations InteTextBlow Below O 0 0 D 0 What is the MinimumPrice you would be willing to pay for this businesses these 12 m are the only with Use this for your MP Calculation Asiscount of 12 Month Cash Flow Prededostament penditure Report Exhibit 1 $230,769 87.692 $143,077 Capstick Muffler Limited Projected Income Statement For Year Ended April 30, 1991 Sales (219,780 1.05) Cost of Mufflers Sold Gross Profit Expenses Accounting & Legal Advertising & Promotion Insurance Interest & Bank Charges Miscellaneous Welding Supplies Civic Taxes Utilities Vehicle Wages & Benefits Net Income before Depreciation Depreciation Net Income before Income Taxes Income Taxes Net Income $1,575 12,600 4,200 15,701 263 9,231 1,050 6,300 2,100 57.645 110,665 32,412 5.400 27.012 5.943 $21.069 0 3 4 Calce Eronditur anti G38 Percentage of Yearly Sales by Month % Month Month % Month % 11.6 May 73 September 6.2 January June 11.9 October 6.5 7.3 February July 9.2 November 7.3 8.8 March 97 August December 42 April 10.0 Source: Company Records Finally, in forecasting his new facility's first-year sales, Capstick projected a 5% inflation rate base, increase in pnces to take effect on May 1st. Capstick felt that general inflation-rate- induced increases in costs could be passed on through corresponding increases in sales prices Projected Cash Expenditures Capstick based his expense projections for the year (500 Exhibit 1) on (1) his previous years experience with adjustments where necessary for increased costs due to the new larger shop. (2his in-town location (3) his use of debt financing to establish his new shop. (4) the 31 implementation of a new promotion strategy, and (5) the current inflation rate. Production supplies were a major expense for the muffier shop the cost of mufflers was 38% of sales and the cost of welding supplies was 4% of sales. Although the cost of mufflers could vary somewhat, Capstick expected no change in the percentage cost of welding supplies. The a mufflers and welding supplies were purchased on 30-day terms in the month preceding the sale Wages, also a major expense, were paid out equally over the year 32 Another major expense was the financing charges on the $121 500 bank loan being negotiated by Capstick to finance the new shop Interest and bank charges were to be paid monthly with interest calculated on the outstanding loan balance at a floating rate of interest of prime (currently 12% plus 1% A51012 50 principal repayment on the loan was also payablo monthly Bank charges were estimated to be $50 per month (et of inflation) Capsbek's new promotion strategy was also expected to result in substantial cash expenditures To launch his new muller Shop Capstick intended to spend about 20% yearly advertising budget in Apolon Opening Soon messages and 30 in May on Now Open" messages. This heavy pont experidie wes abo intended to impress Opstick's *ality and accessibility on the makinght the start season pene The remainder of the starting budget was being pent over the remaining to months to sustain custom wareness ovels Advertising purchases were made boots 52 31 Capsticks depreciation des pacted to increase to about 5 400 bec of theory of nowe palasso rende 14 ception of comete wood to be pens with the Finally, Coste planned to operate nel now shop would ove pay and for all over year ther of 22 Althout the tical year ond Caption would be paid the corpo cathwang ced Apart 01 dents 11 11 LI 14 11 12 MonthCashflow Projected Financial Statem STS PREMIE D 0 P B Capstick Muffler 12-Month Cash Flow Paned Beginning Pened Ending 191 11/01 W121 1/1/20 771521 10/10 11/1991 12/01 1/1992 11:20 4110 Cash Beginning of Pend Cash End of Period 0 0 0 0 0 0 0 0 0 0 Jan 20 Jun 1 Jul 31 Aug 91 Sep31 OCES1 Nov1 Dec91 Jan 92 Feb 2 Mar 20 Apr 20 Operations Cash receipts from Customers omer operations Cash paid for Inventory purchases Coneral operating and Advertisement wage expenses Depreciation Income Net Cash Flow from Operations InteTextBlow Below O 0 0 D 0 What is the MinimumPrice you would be willing to pay for this businesses these 12 m are the only with Use this for your MP Calculation Asiscount of 12 Month Cash Flow Prededostament penditure Report Exhibit 1 $230,769 87.692 $143,077 Capstick Muffler Limited Projected Income Statement For Year Ended April 30, 1991 Sales (219,780 1.05) Cost of Mufflers Sold Gross Profit Expenses Accounting & Legal Advertising & Promotion Insurance Interest & Bank Charges Miscellaneous Welding Supplies Civic Taxes Utilities Vehicle Wages & Benefits Net Income before Depreciation Depreciation Net Income before Income Taxes Income Taxes Net Income $1,575 12,600 4,200 15,701 263 9,231 1,050 6,300 2,100 57.645 110,665 32,412 5.400 27.012 5.943 $21.069 0 3 4 Calce Eronditur anti G38 Percentage of Yearly Sales by Month % Month Month % Month % 11.6 May 73 September 6.2 January June 11.9 October 6.5 7.3 February July 9.2 November 7.3 8.8 March 97 August December 42 April 10.0 Source: Company Records Finally, in forecasting his new facility's first-year sales, Capstick projected a 5% inflation rate base, increase in pnces to take effect on May 1st. Capstick felt that general inflation-rate- induced increases in costs could be passed on through corresponding increases in sales prices Projected Cash Expenditures Capstick based his expense projections for the year (500 Exhibit 1) on (1) his previous years experience with adjustments where necessary for increased costs due to the new larger shop. (2his in-town location (3) his use of debt financing to establish his new shop. (4) the 31 implementation of a new promotion strategy, and (5) the current inflation rate. Production supplies were a major expense for the muffier shop the cost of mufflers was 38% of sales and the cost of welding supplies was 4% of sales. Although the cost of mufflers could vary somewhat, Capstick expected no change in the percentage cost of welding supplies. The a mufflers and welding supplies were purchased on 30-day terms in the month preceding the sale Wages, also a major expense, were paid out equally over the year 32 Another major expense was the financing charges on the $121 500 bank loan being negotiated by Capstick to finance the new shop Interest and bank charges were to be paid monthly with interest calculated on the outstanding loan balance at a floating rate of interest of prime (currently 12% plus 1% A51012 50 principal repayment on the loan was also payablo monthly Bank charges were estimated to be $50 per month (et of inflation) Capsbek's new promotion strategy was also expected to result in substantial cash expenditures To launch his new muller Shop Capstick intended to spend about 20% yearly advertising budget in Apolon Opening Soon messages and 30 in May on Now Open" messages. This heavy pont experidie wes abo intended to impress Opstick's *ality and accessibility on the makinght the start season pene The remainder of the starting budget was being pent over the remaining to months to sustain custom wareness ovels Advertising purchases were made boots 52 31 Capsticks depreciation des pacted to increase to about 5 400 bec of theory of nowe palasso rende 14 ception of comete wood to be pens with the Finally, Coste planned to operate nel now shop would ove pay and for all over year ther of 22 Althout the tical year ond Caption would be paid the corpo cathwang ced Apart 01 dents 11 11 LI 14 11 12 MonthCashflow Projected Financial Statem STS PREMIE