For your online vegetarian catering business, you rent a commercial kitchen, which requires monthly payments of $1,000. On the one hand, you do not have to think about depreciation, repairs, property taxes and utility bills. On the other hand, the kitchen is too small, and you are not satisfied with how it is equipped. Additionally, you have found yourself in conflict with the owner and are concerned that he can terminate your contract unexpectedly. With an increased number of orders, you have decided to consider a loan to extend your business.

You have found new premises that suit your needs. According to your calculations, buying the premises, creating your own kitchen and organizing a loan requires an investment of $200,000. You have done some research and found a loan with the following conditions:

• the down payment constitutes 25% of the total amount of investment;
• the annual interest rate is 4.5%;
• the loan term is 15 years.

1. Prepare a Loan Amortization Schedule for the first year. Use the Excel template provided, and refer to the formulas of the article Amortization Schedule to calculate Total Monthly Payment, Principal Payment and Interest Payment for each of the months.

1. Prepare the Budgeted Income Statement that takes into account the loan.

Assume that the Budgeted Income Statement of your business is as follows:

Option I - Without a loan
Budgeted Income Statement
For the Budget Year Ended December 31
Budgeted sales volume	210,000
Costs
Costs of goods sold	98,692
Marketing and administrative costs	90,910
Total budgeted costs	189,602
Budgeted operating profit	20,398
Interest expense	0
Federal and other income taxes (25%)	5,099.5
Budgeted profit after taxes	15,298.5

NOTE: Currently, the Cost of Goods Sold includes $12,000 of yearly rental payments. Taking a loan will influence the Budgeted Income Statement:

• the Cost of Goods Sold will reduce by the amount of rental payments;
• the Cost of Goods Sold will increase by $4,000 that include depreciation, property taxes, utilities.
• the Cost of Goods Sold will increase by the amount of Principal Payments;
• the Interest Expense will reduce the Budgeted Operating profit.

1. Search on the Internet and find two different loans that could suit your needs (e.g., with a higher interest rate or shorter term). Prepare the Loan Amortization Schedule and Budgeted Income Statement for each of them (use the templates that you prepared to solve the problems above). Compare the four options and choose the one that results in the highest amount of Budgeted Profit After Taxes.