Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me with the following: You invented Dura-Clear windows that never need washing! Nothing sticks to them - not pollution, pollen, dirt, dust, bird

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Please help me with the following:

image text in transcribed You invented "Dura-Clear windows" that never need washing! Nothing sticks to them - not pollution, pollen, dirt, dust, bird droppings, fingerprints, nothing. You've invested all your own savings, your parents' savings, and some of your friends' savings as well into the R\&D, production, and start-up of your business. It's been three years since you started selling your windows primarily to single-family homeowners, but now apartment building contractors across the nation have been requesting your windows. Unfortunately, you're already operating at full capacity. It's time to make the switch from single-family homes to commercial buildings, but to do so requires a large infusion of funding for expansion. You need more of everything: space, equipment, employees, etc. Ever the optimist, you applied to the TV show Shark Tank--where entrepreneurs compete for funding from angel investors ("sharks")--to see if a shark will invest in your company and serve as a mentor as well. To your surprise, you were accepted to the show! You've already prepared most of your marketing and sales pitches, and now it's time to put together your forecasted financial statements. You intend to show the sharks that backing your business would be a very profitable investment. You also need to determine how much funding to ask for in exchange for how much ownership you'll give up. The following 2 Notes apply! NOTE 1: YOu must show ALL your work. Either your computations are in the cell behind your result, or you must place them out to the right on the Forecasted Financials tab. If you choose to show your work out to the right, show all steps and label your work clearly so it can be understood. NOTE 2: Do not round computations until you have found your final answer. Then, round your result to the nearest dollar. No pennies! NOTE: You will use a combination of Proforma, Ratios, and the Percent-of-Sales methods to create your forecasted financials. The Sharks gave you the $1,000,000 in funding you requested in exchange for 25% ownership of your company's profits. 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 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.) RENT EXPENSE: Rent expense is a fixed cost in the amount of $15,000 per year in 20202022, increasing to $200,000 per year in 2023. DEPRECIATION EXPENSE: Depreciation expense is a fixed cost in the amount of 10% of Plant \& Equipment each year. INTEREST EXPENSE: This is a Fixed cost, and is 10\% of Long-term Liabilities. 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 SHARES: Issued 26,000 \$1-par shares to the sharks for a 25% 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. (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!) 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: There is a new capital expenditure of $750,000 dollars in 2023, paid for from the $1M in funding from the sharks, rather than with 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 MILESTONE 2 METRICS SHOW ALL YOUR SUPPORTING CALCULATIONS! You may do this either within the cell by using formulas, or to the side or below -- clearly labeling your work. All your work must be shown on this sheet, not on a separate tab. 115 points: 5 for showing work, 10 for accuracy Based upon your financial forecast for the years 2023 - 2027, compute the following ratios, placing your final results in the yellow highlighted area: 215 points: 5 for showing work, 10 for accuracy Compute Required New Funds (RNF) for each year (HINT: See Formula 4-1 in your Week 3 Chapter readings) OPTIONAL: It would be very helpful to fill out the table below identifying the necessary variables before attempting to compute RNF. 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. You invented "Dura-Clear windows" that never need washing! Nothing sticks to them - not pollution, pollen, dirt, dust, bird droppings, fingerprints, nothing. You've invested all your own savings, your parents' savings, and some of your friends' savings as well into the R\&D, production, and start-up of your business. It's been three years since you started selling your windows primarily to single-family homeowners, but now apartment building contractors across the nation have been requesting your windows. Unfortunately, you're already operating at full capacity. It's time to make the switch from single-family homes to commercial buildings, but to do so requires a large infusion of funding for expansion. You need more of everything: space, equipment, employees, etc. Ever the optimist, you applied to the TV show Shark Tank--where entrepreneurs compete for funding from angel investors ("sharks")--to see if a shark will invest in your company and serve as a mentor as well. To your surprise, you were accepted to the show! You've already prepared most of your marketing and sales pitches, and now it's time to put together your forecasted financial statements. You intend to show the sharks that backing your business would be a very profitable investment. You also need to determine how much funding to ask for in exchange for how much ownership you'll give up. The following 2 Notes apply! NOTE 1: YOu must show ALL your work. Either your computations are in the cell behind your result, or you must place them out to the right on the Forecasted Financials tab. If you choose to show your work out to the right, show all steps and label your work clearly so it can be understood. NOTE 2: Do not round computations until you have found your final answer. Then, round your result to the nearest dollar. No pennies! NOTE: You will use a combination of Proforma, Ratios, and the Percent-of-Sales methods to create your forecasted financials. The Sharks gave you the $1,000,000 in funding you requested in exchange for 25% ownership of your company's profits. 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 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.) RENT EXPENSE: Rent expense is a fixed cost in the amount of $15,000 per year in 20202022, increasing to $200,000 per year in 2023. DEPRECIATION EXPENSE: Depreciation expense is a fixed cost in the amount of 10% of Plant \& Equipment each year. INTEREST EXPENSE: This is a Fixed cost, and is 10\% of Long-term Liabilities. 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 SHARES: Issued 26,000 \$1-par shares to the sharks for a 25% 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. (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!) 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: There is a new capital expenditure of $750,000 dollars in 2023, paid for from the $1M in funding from the sharks, rather than with 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 MILESTONE 2 METRICS SHOW ALL YOUR SUPPORTING CALCULATIONS! You may do this either within the cell by using formulas, or to the side or below -- clearly labeling your work. All your work must be shown on this sheet, not on a separate tab. 115 points: 5 for showing work, 10 for accuracy Based upon your financial forecast for the years 2023 - 2027, compute the following ratios, placing your final results in the yellow highlighted area: 215 points: 5 for showing work, 10 for accuracy Compute Required New Funds (RNF) for each year (HINT: See Formula 4-1 in your Week 3 Chapter readings) OPTIONAL: It would be very helpful to fill out the table below identifying the necessary variables before attempting to compute RNF. 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Islamic Finance Law Economics And Practice

Authors: Mahmoud A. El-Gamal

1st Edition

0521864143,0511218117

More Books

Students also viewed these Finance questions