I am just going to first present the scenario, with answers I already have. I am just needing some help towards the end. So this is what I have so far: Identify on the pro forma income statement if in each area will increase, decrease or stay the same due to large businesses moving into the neighboring buildings into his area and explain the rationale why that line item will increase, decrease or stay the same. Tim serves coffee to many people who work in the area, so he would certainly expect a major increase in his business volume. He owns and operates a single coffee shop in a mid sized downtown city in a business district. This is looking for primarily your justification on why the line items will change and what direction they will change, if any. You may make assumptions based on the increased sales volume and how it will affect income and expenses, if/when you do make these assumptions, please describe them and their affects on each line item. These are the line items: Income Earned - Income earned will increased as the business volume will increase due to rise in population in nearby area. Expenses include: Salaries - Salaries will increase as the existing staff will have to work extra hours or the coffee shop will need to employ more staff to serve to increased number of customers. Rent - Rent will increase eventually because the property rates will go up after the establishment of large businesses in the locality Depreciation - Will not change Supplies - Supplies will increase in accordance with the increase in the sales volume Lease (on your refrigerator) Will not be affected Tax - Will not be affected. Interest (on loans currently held) - Will not be affected Insurance Will not be affected I am hoping this is all correct thus far. This very last part is where I still need help primarily, and would really appreciate your help and knowledge; Given what you have assumed and projected, will the total expenses increase or decrease? Why? Given what you have assumed and projected, will the net profit increase or decrease? Why?