Projected Income Statement Creation Exercise

Assume that you are part of a team that is preparing to Launch Sunflower Solar LLC, a solar panel installation company that will be located in Wichita, KS. Sunflower Solar is targeting residential and commercial customers in south central Kansas. Installing solar panel on the roof of an individual residence or business is growing in popularity as more people and businesses are interested in cutting long term energy costs that continue to increase each year. While installations costs are expensive - $20,000 on average for a residence and more expensive for a business installation prices are decreasing as solar panel costs decrease. The federal government in the U.S. allows homeowners to deduct 30% of the cost of the solar installation from their taxes. For now, this tax credit is available through 2021.

According to Solar Energy Industries Association sales for solar panel installation have grown 60% over the period 2011-2013. This growth is expected to continue into the future. There are several solar panel installation companies on the Inc. 5000 list for 2016. Some of these include:

Missouri Sun Solar (Springfield, MO) 2015 sales = $9.8 M; 3-year growth = 2,327%; 2013 sales = $421.143. Founded in 2012

Auric Solar (Midvale, UT) 2015 sales = $28.9 M; 2014 sales = $13.6 M; 3 year growth = 1,521%; 2012 sales = $755,000. Founded in 2010.

Sigora Solar (Waynesboro, VA) 2015 sales = $5 M; 2014 sales = $3.2 M; 3 year growth = 661%; 2012 sales = $253,000. Founded in 2011.

Cromwell Solar located in Lawrence Kansas installs 100 solar projects each year in the Kansas and Missouri region.

IBIS World industry report on solar panel installation estimates that the industry will grow at an annual rate of 9.1% over the next five years.

Risk Management Statement Data for Solar Panel Installation Industry

Net Sales 100%

Gross Profit 60% (This means that the Cost of Goods Sold is 40% of sales)

Operating Expenses is 30% of sales.

Using the data above, calculate the income statement for Sunflower Solar for the next five years.

	Year 1	Year 2	Year 3	Year 4	Year 5
# of solar installations (units)
Price
Total Sales
Costs of Goods Sold
Gross Margin
Operating Expenses
Gross Profit

How did you calculate your total sales and sales growth projections? Please describe your logic.

Using the data above, calculate the income statement for Sunflower Solar for the next five years.

	Year 1	Year 2	Year 3	Year 4	Year 5
# of solar installations (units)
Price
Total Sales
Costs of Goods Sold
Gross Margin
Operating Expenses
Gross Profit

How did you calculate your total sales and sales growth projections? Please describe your logic.