Scenario$-$ Your CEO has asked you to evaluate launching a new product line for your company. Based on your experience and knowledge of the market, you have estimated the following results for the first five $(5)$ years of the Project. Expected revenues: Year $(000$s$)$

$1,2,3,4,5->80,120,200,340,460$ The Company yearly purchases $($COGS$)$ from suppliers $=50\%$ of the forecasted sales.

$$ General and administrative expenses $($wages$,$ taxes, office etc.$)$ are estimated at $15\%$ of sales.

$$ Sales salaries and commissions are estimated to be $10\%$ of sales.

$$ The Project requires and initial equipment investment of $$150.$

$$ Annual depreciation expense of the equipment is $$30.$

$$ Annual interest expense on the money borrowed to pay for the equipment is $$6.$

$$ The company tax rate is $35\%.$ Question #$1(10$ marks$)$

$$ Using the above projections and the template in Appendix A build a Pro$-$forma Income Statement for each year of the Project.

$$ In the template below the Income Statement calculate the Operating Cash Flows and Total Cash Flows for each year. Appendix A $$ Proforma Income Statement $12345$ Revenues

COGS

Gross Profit

Expenses$-$ Sales Salaries & Commissions General & Admin Expenses Depriciation Expense Total Operating Expenses EBIT

Interest

EBT

Less Taxes $(35\%)$

Net Income $->$Operating Cash Flow Initial Investment

Total Cash Flows