Financial Model (Excel homework) Eng. Economics (EGN 3615)

Sneakers For All, LLC. is having success selling casual sneaker shoes for everyday use. The company is looking to grow the annual sales and for that has put a comprehensive strategy that includes aggressive marketing and a potential acquisition of a manufacturing plant. Currently they are outsourcing the sneakers manufacturing, but they wonder if their unit cost will be better if they do it themselves.

Their selling price is $200 per unit, and they are on track to sell 50,000 units by year end. The total market size they play in is estimated to be 1,000,000 units, therefore in year 1 they are targeting to capture 5% of the market for a total of 51,000 units. If they are successful implementing their marketing strategy, they should capture share every year as follows:

2022: 0% (= 50,000 units)

2023: 5% (= 51,000 units)

2024: 10%

2025: 15%

2026: 20%

2027: 25%

2028: 25%

And maintain 25% share from there on.

Note: The total market will also grow at a rate of 2% every year.

The company is also investing in Research and Development every year as follows:

2022: $3,000,000

2023: $3,000,000

2024: $1,500,000

2025: $500,000

And keep investing $500,000 from there on.

Sneakers, LLC spends 10% of their sales in Sales and Marketing expenses plus another 3% in General and Administrative expenses.

If they decide to buy the manufacturing plant, they will have to incur in $25,000,000 capital investment to be depreciated in 15 years. (Use straight line method to depreciate the asset) and consider a 35% provision for income taxes.

Is what I've input in the Excel screenshot correct? Im a heading in the right direction? If not, what am I missing or incorrect on?

In-House Manufacturing