It$$s STILL January $1,2023,$ and you$$ll be going on Shark Tank in $2$ weeks. You are unhappy with your previous Sales

Forecast $($Milestone $1)$ because using your current level of sales to residences was not a good predictor of your

upcoming sales to commercial builders. You believe your sales will increase significantly and that each order will result

in a higher profit. You decide to change your forecasting method to a combination of Ratios, Percent$-$of$-$Sales, and Pro

Forma forecasting.

Required:

$1(20$ pts$)$ Using the information on the Assumptions tab, create a $5-$year forecasted Income Statement on the

Forecasted Financials tab.

ASSUMPTIONS

NOTE: You will use a combination of Proforma, Ratios, and the Percent$-$of$-$Sales methods to create your forecasted financials.

$1$ The Sharks gave you the $$1,000,000$ in funding you requested in exchange for $25\%$ ownership of your company$$s

profits.

$2$ All the following are complete by March $31,2023$: $1)$ your shark funding has been received, $2)$ new capital

investments have been purchased and set up$,$ and $3)$ additional labor has been hired and trained.

$3$ SELLING & ADMINISTRATIVE EXPENSE: Use a $3-$year average Percent$-$of$-$Sales to forecast S&A expenses. $($HINT:

Find what percent S&A expense is for each of $2020,2021,$ and $2022,$ and average the $3$ results together. Use the

resulting average S&A Percent$-$of$-$Sales to forecast S&A into the future.$)$

$4$ RENT EXPENSE: Rent expense is a fixed cost in the amount of $$15,000$ per year in $2020-2022,$ increasing to

$$200,000$ per year in $2023.$

$5$ DEPRECIATION EXPENSE: Depreciation expense is a fixed cost in the amount of $10\%$ of Plant & Equipment each

year.

$6$ INTEREST EXPENSE: This is a Fixed cost, and is $10\%$ of Long$-$term Liabilities.

$7$ TAXES: Because you live in a business$-$friendly State $($Wyoming$),$ you don$$t have to pay state taxes on your LLC$$s

income. You do$,$ however, still have to pay Federal taxes. Also, in $2022,$ higher tax rates were passed for the $2023$

tax year, pushing income over $$400,000$ into the $39\mathrm{.}6\%$ tax bracket. Because of this, use $36\%$ as your effective tax

rate. $($NOTE: If the taxes

shown for $2020-2022$ seem high, it$$s because you had income from another job that threw your LLC income into a

slightly higher tax bracket. However, you$$ll quit that job IF the sharks fund you!$)$

$8$ SHARES: Issued $26,000$ $$1-$par shares to the sharks for a $25\%$ ownership stake.

$9$ CASH: Increases to $$50,000$ in $2023$ and stays at that level.

$10$ MARKETABLE SECURITIES: Plan to keep Marketable Securities at $60\%$ of Cash levels.

$11$ ACCOUNTS RECEIVABLE: Use a $3-$year average Receivables Turnover ratio to forecast. $($HINT: Find the formula for

Receivables Turnover $($RTO$)$ in your Week $2$ Chapter readings, and solve for RTO for each of $2020,2021,$ and $2022.$

Average the $3$ results together. Plug your Average RTO into the RTO formula for each future year, along with your

other known number from your financial statements, to find your forecasted Accounts Receivable amounts. This is

demonstrated in your Week $2$ Lesson!$)$

$12$ INVENTORY: Compute a $3-$year average of inventory as a Percent$-$of$-$Sales, and then use that figure to forecast

inventory levels through $2027.$

$13$ PLANT & EQUIPMENT: There is a new capital expenditure of $$750,000$ dollars in $2023,$ paid for from the $$1$M in

funding from the sharks, rather than with new debt. $($All capital expenditures are assumed to occur on January $1$st

of the year of purchase, and no equipment is sold or salvaged during the forecasted period.$)$

$14$ ACCUMULATED DEPRECIATION: Each year, $10\%$ of the total amount of Plant and Equipmentis added to the

depreciation amount.

$15$ ACCOUNTS PAYABLE: Use the $3-$year average Current Ratio to forecast. $($HINT: The Current Ratio will help you

forecast TOTAL Current Liabilities, not Accounts Payable. Find Total Current Liabilities and Accrued Expenses first,

and then you can solve for Accounts Payable.$)$

$16$ ACCRUED EXPENSES: Use the $3-$year average Percent$-$of$-$Sales method to forecast.

$17$ LONG$-$TERM LIABILITIES: Pay down $$100,000$ of old debt every year starting in $2023.$

$18$ COMMON STOCK $($$$1$ Par$)$: Increase by the dollar value of shares issued to sharks $(26,000$ shares at $$1$ par$).$

$19$ CAPITAL PAID IN EXCESS OF PAR: The shark's full investment of $$1$M must be reflected on the Balance Sheet.

The stock received by the shark, worth $$26,000($at Par value of $$1$ per share$),$ is already reflected under Common

Stock. The rest of the shark's investment value is added to this account.

$20$ RETAINED EARNINGS: This amount is whatever it takes to make the Balance Sheet balance! $($HINT: Remember

Total Liabilities $+$ Stockholder's Equity is equal to Total Assets. Once Total L $+$ SE is determined, Total SE can be

solved. Finally, once Total SE is solved, Retained Earnings can be solved.$)$

$21$ DIVIDENDS: You do not pay dividends now and do not plan to while in a growth stage.

MILESTONE $2$ FORECASTED FINANCIALS

Fill in the yellow highlighted cells with your forecasted figures.

SHOW ALL YOUR SUPPORTING CALCULATIONS! You