Steven Black and Christopher Green are seeking funds to support the programmed growth of their deluxe Hot Dog menu-restricted restaurant. First year (2019) Sales were $705,000. Sales are projected to increase to $1,320,000 in 2020. The business operating financial model indicates that each hot dog meal will sell for $3; and the variable cost of producing the meal (CGS) will be $1.50. The company needed $400,000 in assets to support its 2019 operations and expects to need $100,000 MORE (a total of $ 500,000) to support projected 2020 Sales.

2019 2020 (projected)

Sales $ 705,000 _________

COGS (Meals x CGS) 352,500 __________

Gross Profit 352,500 ________

Fixed Operating Costs (ignore taxes) 200,000 __________

Net Profit $152,500 $ ______

Prepare (fill in) the 2020 projected Income Statement above.

Calculate the companys Return on Assets (ROA), its asset intensity (asset turnover ratio), and its Gross Profit and Net Profit Ratios for each year

2019 2020

Return on Assets __________ ____________

Asset Turnover ____________ ________________

Gross Profit Margin _______________ _________________________

Net Profit Margin ______________ _____________________

Given the 2019 calculations above, and the 2020 projections, use the VOS screening model standards below for profitability and pricing to evaluate the attractiveness of an investment in Steven and Christophers business.

High Average Low

Gross Margin >50% 10%--50% <20%

AT margin >20% 10%--20% <10%

Asset Intensity 3.0+ Turnover 1.03.0 Turnover <1.0 Turnover

Return on Assets >25% 10%--25% <10%

COMMENTS/EVALUATION (You should include comments about what the company could do to make the investment more attractive to investors)

Margins:

Use of Assets:

How would your EVALUATION change if the 2019 Asset level will support Annual Sales growth of 50% per year in 2020? (That means the company had excess capacity in 2019 and more assets would not be required to support shortterm projected growth.)

PLEASE HELP ME. THANK YOU.