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 because your current sales to residences do not really predict your upcoming sales to commercial builders. You believe your incoming orders will be much higher than before with each order resulting in a much higher revenue stream. You decide to change your method of forecasting to a mix of Percent-of-Sales and Pro Forma forecasting. Required: 1 (25 pts) Using the information on the Assumptions tab, create a 5-year forecasted Income Statement on the Forecasted Financials tab. The Sharks gave you the $1,000,000 in funding you asked for in exchange for 25% ownership of your company's profits. You issued 26,000 $1-par shares to the Sharks and updated your additional paid- in capital by the excess received. The sharks have a 9% Required Rate of Return on their investment (needed for Milestone 3). 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 SALES: a. All Sales are credit sales. b. In 2023, your expanded operations enable Production and Sales to double your 2022 sales (due to selling more windows to the commercial builders and increasing the sale price per window). c. Quantity of windows sold is expected to increase 25% every year from 2024 on. d. Due to inflation and demand, at the start of 2024 you increase your selling price per window by 9%. COGS: Compute your 2022 COGS as a Percent of Sales ratio, and then subtract 10% because you'll be able to get volume discounts for your materials now that you've expanded. Use this adjusted ratio to forecast COGS across all years. SELLING & ADMINISTRATIVE EXPENSE: S&A Expense is a "mixed" expense, so fixed expenses must be removed before forecasting S&A, and then added back once that's done. Use a 3-year average Percent of Sales to forecast variable S&A expenses. (HINT: Recall that since S&A is an expense, and therefore negative, to remove fixed expenses, you must ADD them!) All S&A expenses are variable expenses EXCEPT for the following 2 fixed costs: 1. Rent expense of $15,000 per year in 2020-2022, increasing to $200,000 per year in 2023-2027. 2. Depreciation expense is included in S&A in the amount of 10% of Plant & Equipment each year. INTEREST EXPENSE: This is a Fixed cost, and is 10% of Long-term Liabilities. Guil TAYES. D 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 39.6% 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!) SHARES: Issued 72,000 $1-par shares to the sharks for a 48% ownership stake. CASH: Increases to $50,000 in 2023 and stays at that level. MARKETABLE SECURITIES: Plan to keep Marketable Securities at 60% of Cash levels. ACCOUNTS RECEIVABLE: Use a 3-year average Receivables Turnover ratio to forecast. INVENTORY: Compute a 3-year average of inventory as a percent of sales, and then use that figure to forecast inventory levels through 2027. PLANT & EQUIPMENT: New capital expenditure of $750,000 dollars in 2023, paid for with equity funding from the sharks, rather than new debt. All capital expenditures are assumed to occur on January 1st of the year of purchase, and no equipment is sold or salvaged during the forecasted period. ACCUMULATED DEPRECIATION: Each year, 10% of the total amount of Plant and Equipment is added to the depreciation amount. ACCOUNTS PAYABLE: Use the 3-year average Current Ratio to forecast. ACCRUED EXPENSES: Use the 3-year average Percent of Sales method to forecast. LONG-TERM LIABILITIES: Pay down $100,000 of old debt every year starting in 2023. COMMON STOCK ($1 Par): Increase by the dollar value of shares issued to sharks (26,000 shares at $1 par). CAPITAL PAID IN EXCESS OF PAR: Compute new figure using shark investment, less par value of common stock. RETAINED EARNINGS: Fill in the amount needed to balance the Balance Sheet. DIVIDENDS: You do not pay dividends now and do not plan to while in a growth stage. FIXED & VARIABLE COSTS: The only fixed costs are rent expense, depreciation expense, and interest expense. All other costs are variable. MILESTONE 2 FORECASTED FINANCIALS Fill in the yellow highlighted cells with your forecasted figures. SHOW ALL YOUR SUPPORTING CALCULATIONS! You may do this either within the cell by using formulas, out to the right, or both -- clearly labeling your work. All your work must be shown on this sheet, not on a separate tab. Forecasted Income Statement (25 points) Sales (all on credit) Cost of Goods Sold Gross Profit Selling and Administrative Expense Operating profit (EBIT) Interest expense Net Income before Taxes Taxes Net Income Shares Earnings per Share 2020 1,200,000 (800,000) 400,000 (304,900) 95,100 (35,000) 60,100 (36,900) 23,200 60,000 $0.39 DURA-CLEAR WINDOWS, LLC Proforma Income Statement 2022 2021 1,500,000 (1,040,000) 460,000 (350,500) 109,500 (45,000) 64,500 (49,200) 15,300 60,000 $0.26 1,875,000 (1,105,000) 770,000 (443,700) 326,300 (85,000) 241,300 (55,600) 185,700 78,000 $2.38 2023 2024 2025 2026 2027