The forecasted EBIDTA (Operating Profit) in year-2 is negative $184,800 (the negative value of accounts is often represented by brackets) and presently the same for year-3. However, after hiring a manufacturing consultant, you believe that you can achieve a 30% reduction in COGS in Year-3 (with improved material sourcing and increased production line efficiency). In addition, your CEO recommends reducing certain unnecessary manager positions in Year-3 (once workforce is fully trained), eliminating certain positions and rewarding efficiency in the work force. Likewise, the CEO offers to restructure his compensation package from non-incentivized bonuses to mainly Stock Options (which increase value with profitability). He estimates this strategy can reduce Salary/Wages and related G&A expenses by 15%. Given these improvements, what is the new Bottom Line (Net Income before tax and after tax) in year-3?

Consider the following Profit and Loss (P&L) Pro Forma for the following problem: $ REVENUE OPERATING EXPENSE REVENUE COST OF GOODS SOLD GROSS MARGIN Percentage (G.M./ Hev.) Fixed Operating Expenses Rent Salary/Wage Marketing & Advertising G&A OPERATING EXPENSES OPERATING PROFIT As a Percentage of Reverne INTEREST INCOME/EXPENSE AMORTIZATION EXPENSE DEPRECIATION (Buildings) DEPRECIATION (Equipment DEPRECIATION EXPENSE TOTAL NET INCOME BEFORE TAXES TAX PROVISION (35%) NET INCOME Year 1 $ 624,000 $ 480,000 $ 144,000 23.1% 120,000 $ S 168,000 S 60,000 S 62.400 S 410,400 S 266,400) -42.69% S (40,000) $ (3,000) S (26,667) (30,000) $ (56,667) $ (388,067) $ $ (386,067) Year 2 $ 1.248.000 S 960,000 $ 288.000 23.1% $ 120,000 S $ 168,000 $ 60,000 $ 124,800 $ 472,800 $ (184,800) - 14.81% $ (37,490) $ (3,000) $ (26,667) (30,000) $ (56,667 $ (281,957) $ $ (281,957) Year 3 $ 1,248,000 960,000 $ 288,000 23.1% $ 120,000 $ $ 168,000 $ 60,000 $ 124.800 $ 472.800 S (184,800 -14,81% S (34,729) S (3.000) S (26,667) S (30,000) S 156,667 $ 279,196) S $ 279,196) ADJUSTMENTS cs