Financial Projections Exercise For this exercise, assume that you are part of a team that is preparing to Launch Sunflower Solar LLC, a solar panel installation company that will be located in Wichita, KS. You will need to construct/estimate a pro forma (future projections) income statement for this company using the information provided below. Sunflower Solar is targeting residential and commercial customers in south central Kansas. Installing solar panel on the roof of an individual residence or business is growing in popularity as more people and businesses are interested in cutting long-term energy costs that continue to increase each year. While installations costs are expensive, - $20,000 on average for a residence and more expensive for a business - installation prices are decreasing as solar panel costs decrease. The federal government in the U.S. allows homeowners to deduct 30% of the cost of the solar installation from their taxes. For now, this tax credit is available through 2021. According to Solar Energy Industries Association, the solar installation industry has experienced an average annual growth rate of 54%. Another industry report from IBIS World projects that annual growth in the solar panel installation industry over the next five years will be 14 %. Please recognize that these two estimates (54 % and 14%) reflect average growth projections for all companies in the industry. A startup will likely experience much higher growth because they are going from $0 sales to some level of sales, which will result in a higher amount of sales growth. Below I list the sales and sales growth of several solar panel installation companies on the Inc. 5000 list for 2016, 2017, and 2018. Notice that their sales growth is much higher than the industry averages. These sales growth figures are likely in part because these firms are relatively new (e.g., startups) and in a growth industry (an industry where everyone grows). You will likely want to project your sales growth for this assignment somewhere between the industry estimates and these high growth firms in the industry. EnviroSolar Power (Fort Worth, TX) 2016 sales $37.4 M; 3-year growth = 36,065. Missouri Sun Solar (Springfield, MO) 2015 sales = $9.8 M; 3-year growth = 2,327%; 2013 sales = $421.143. Founded in 2012 Auric Solar (West Valley, UT) 2017 sales = $49.7 M, 2016 sales = $44.1 M, 2015 sales = $28.9 M; 2014 sales = $13.6 M, and 2012 sales = $755,000. 3 year growth = 309% (2014- 2017). Founded in 2010. Employees 200 Wells Solar (Austin, TX) 2017 sales = $9.6 M; 2015 sales = $ 435,375; 3 year growth = 2,205%; Founded in 2014. Employees 41 = . BD Solar (Odessa, FL) 2017 sales = $3.7 M; 2015 sales = $547,337; 3-year growth = 676%; Founded in 2013. Employees 43 Cromwell Solar located in Lawrence Kansas installs 100 solar projects each year in the Kansas and Missouri region. Industry Estimated costs from IBIS World Net Sales - 100% Costs of Goods sold is 46% (This means that operating profit is 54% of sales) Operating Expenses is 48% of sales. Using the data above, calculate the income statement for Sunflower Solar for the next three . years. Year 1 Year 2 Year 3 # of solar installations (units) Price Total Sales Costs of Goods Sold Gross Margin Operating Expenses Gross Profit Calculations in Spreadsheet: Total Sales = # of units x price Gross Margin = Total Sales - Cost of Goods Sold. "Gross Profit = Gross Margin - Operating Expenses this is not labeled as Net Profit because it is before taxes. You do not need to calculate taxes for this assignment. Assumption Sheet: How did you calculate your price, total sales, sales growth, and expense (e.g., cost of goods sold and operating expenses) projections? Please describe your logic. Suggestions on how to put this together: (see below) - Step 1: Estimate the number of unit sales for year 1. - This is your best guest but you have several companies' data to use as a guide when estimating possible unit sales. It likely is not realistic to expect that a new startup would match the sales level of a close competitor (i.e., Cromwell's 100 units) in year-1 but you should expect to sell more than 0. Step 2: Estimate price - You can match the average price of $20,000 or argue a higher or lower price given your assessment of what customers would pay in the Wichita market. - Step 3: Estimate sales growth - use the Inc. 5000 firm examples that are given as a reference here. You will likely not grow as much as these firms but as a startup your growth rate will likely be a lot higher than the industry average that is given (i.e., 14%). To calculate year-2 unit sales you will need to multiple your year-1 unit sales estimate by your sales growth estimate for year-2. Year-3 unit sales will be calculated by multiplying your year-2 unit sales by your growth estimate for year-3. Step 4: Estimate costs - industry average costs are given to you as a percentage of sales. Use these average costs for your cost estimates