Luke has a passion for cheesecake. He started making them a few years ago, and they are amazing. At first Luke made cheesecakes for friends, but she soon realized there was a market demand for well-made desserts. After perfecting his recipes, Luke began selling custom-order cheesecakes that he made at home and sold via word of mouth. The cheesecakes are now so popular that Luke does not have the equipment to keep up with demand. Therefore, he plans to buy a food truck that is equipped with all the equipment he needs to bake cheesecakes in higher volume, and he will be able to drive the truck to locations throughout California to sell cheesecakes by the slice.

If Luke is able to attract an investor, startup costs will be $200,000 in equipment that is depreciable on a 7-year MACRS schedule. Lukes plan is to start and operate the business for 6 years at the end of which time she expects the business to be worth at least $380,000 You expect Luke to have initial working capital needs of $15,000, but these needs will remain proportionate to sales (they will grow at the same rate as sales grow). You expect sales in the first year to be $250,000 and that sales will grow by 20% per year. You project annual fixed operating expenses of $95,000 in the first year. These fixed expenses will grow by 10% per year. Your annual variable operating expenses are as follows: cost of goods sold will be 40% of sales, marketing, general, and administrative expenses are expected to be 10% of sales, and all other operating expenses are expected to be 5% of sales.

You expect Luke to pay taxes of 21%. Assume your required return is 15%.

Please Prepare pro forma income statements and operating cash flow projections using Excel.