Francine Delgado has developed a business plan for producing and selling a new hair care product that emits nutrients to the scalp when used and the product residues have been judged to be environmentally safe. Following are her projected partial financial statements for the first three years of operation of the HairCare Products Company. Francine, however, is unsure whether to organize her business as a proprietorship or a regular corporation.

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HairCare Products Company

Projected Partial Income Statements

& Balance Sheets

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Year 1 Year 2 Year 3

Sales $200,000 $400,000 $1,800,000

Cost of goods sold -100,000 -200,000 -800,000

Gross profit 100,000 200,000 1,000,000

Operating expenses -75,000 -100,000 -200,000

Depreciation -4,000 -8,000 -20,000

Earnings before interest & taxes 21,000 92,000 780,000

Interest -1,000 -2,000 -4,000

Earnings before taxes 20,000 90,000 776,000

Taxes ? ? ?

Net income ? ? ?

Year 1 Year 2 Year 3

Cash and inventories $50,000 $100,000 $500,000

Building and equipment 50,000 100,000 300,000

Total assets $100,000 $200,000 $800,000

A. Use the tax rate schedules presented in the chapter to estimate the dollar amount of taxes that would have to be paid in each year by the HairCare Products Company if the venture was initially formed as a corporation. Also calculate the after-tax net income for each year.

B. Use the tax rate schedules presented in the chapter to estimate the dollar amount of taxes that would have to be paid in each year if the HairCare Products Company was organized as a proprietorship, represented Francines only source of income, and she was single. Also calculate the after-tax net income for each year.

C. Use ratios from Chapter 2 to calculate the return on assets (ROA) model and its net profit margin and asset intensity ratios.

D. In order to grow sales, HairCare Products will need to invest in assets to support sales growth. How might the ventures assets be financed?

E. Would you recommend that the HairCare Products Company be initially formed as a proprietorship or as a corporation? Why? Should Francine consider changing the form of business organization for the HairCare Products Company as the firm grows over time?

Thanks - tax rates are standard from 2016 found here: https://www.thebalance.com/corporate-tax-rates-and-tax-calculation-397647