Using the PowerPoint Lecture “Creating Projections,” create a new set of project
ID: 2776544 • Letter: U
Question
Using the PowerPoint Lecture “Creating Projections,” create a new set of projections for Years X E and X +1 E.
(an Excel File - Provided as a separate file in this Week 7 Content Folder). Please make sure you put your name in the appropriate box on the worksheet!
All historical information remains the same (through Year X-1).
Use this new set of assumptions:
Revenue growth:
30% Year X
30% Year X + 1
1% improvement in Gross Margin for Year X E (from year X-1). No further change in the Gross Margin for Year X+1.
1% improvement in Selling in Year X E. Same level in Year X+1 E.
G&A remains constant on a common size basis.
$10,000 increase in R&D in X E.
Same R&D level in Year X+1 E.
Basic Shares outstanding – 3,000,000.
A new section of the existing plant is constructed for $300,000. This new construction is depreciated over 30 years using the straight line method. All other depreciation remains the same for the years X E and X+1 E.
The plant is financed with a $300,000 10 year bond with a fixed interest payment of 10% annually.
The Company, for the first time, grants 500,000 options to various members of management with an exercise price of $1.00. These options are granted on the first day of Year X E.
There are no other options, warrants or convertible securities.
The average stock price for Year X E and Year X+1 E is projected to be $5.00.
All other interest payments, interest income and tax rates remain the same.
Your Name Here Year X - 1 Year X E Year X + 1 E Revenue $ 1,440,000 100.0% Cost of Goods Sold 921,600 64.0% Gross Profit 518,400 36.0% Selling 158,400 11.0% General and Administrative 108,000 7.5% Research and Development 40,000 2.8% Depreciation and Amortization 30,000 2.1% Total Operating Expenses 336,400 23.4% Operating Income 182,000 12.6% Interest costs 5,000 0.3% Interest income 4,000 0.3% Pre-Tax Income 181,000 12.6% Tax (35%) 63,350 4.4% Net Income $ 117,650 8.2% Earnings Per Share - Basic $ 0.04 Earnings Per Share - Diluted Shares Outstanding 3,000,000 Shares For Diluted A Options 500,000 Ex Price $ 1.00 Stock Price $ 5.00 Proceeds $ 500,000 New Share structure 3,500,000 Buy Back Shares 100,000 Shares for Diluted Calculations 3,400,000 Year X E Year X + 1 E Revenue $ - $ - Gross Margin Depreciation and Amortization - - Operating Income - - Operating Margin Interest Expense - - Net Income $ - $ - Basic EPS $ - $ - Diluted EPS $ - $ - Shares used to calculate Diluted EPS - -Explanation / Answer
The completed statement is given below:
Year X - 1 Year X E Year X + 1 E Revenue 1,440,000 100.0% 1,872,000 100% 2,433,600 100% Cost of Goods Sold 921,600 64.0% 1,179,360 63.0% 1,533,168 63.0% Gross Profit 518,400 36.0% 692,640 37.0% 900,432 37.0% Selling 158,400 11.0% 187,200 10.0% 243,360 10.0% General and Administrative 108,000 7.5% 140,400 7.5% 182,520 7.5% Research and Development 40,000 2.8% 40,000 2.1% 40,000 1.6% Depreciation and Amortization 30,000 2.1% 40,000 2.1% 40,000 1.6% Total Operating Expenses 336,400 23.4% 407,600 21.8% 505,880 20.8% Operating Income 182,000 12.6% 285,040 15.2% 394,552 16.2% Interest costs 5,000 0.3% 35,000 1.9% 35,000 1.4% Interest income 4,000 0.3% 4,000 0.2% 4,000 0.2% Pre-Tax Income 181,000 12.6% 254,040 13.6% 363,552 14.9% Tax (35%) 63,350 4.4% 88,914 4.7% 127,243 5.2% Net Income $117,650 8.2% $165,126 8.8% $236,309 9.7% Earnings Per Share - Basic $0.04 Earnings Per Share - Diluted Shares Outstanding 3,000,000 3,000,000 3,000,000 Shares For Diluted 3,400,000 3,400,000 A Options 500,000 Ex Price $1.00 Stock Price $5.00 Proceeds $500,000 New Share structure 3,500,000 Buy Back Shares 100,000 Shares for Diluted Calculations 3,400,000 Year X E Year X + 1 E Revenue $1,872,000 $2,433,600 Gross Margin Depreciation and Amortization 40,000 40,000 Operating Income 285,040 394,552 Operating Margin Interest Expense 35,000 35,000 Net Income $165,126 $236,309 Basic EPS $0.06 $0.08 Diluted EPS $0.05 $0.07 Shares used to calculate Diluted EPS 3,400,000 3,400,000Related Questions
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