Anew software company believes revenue must reach $5 million in Year 3 for the company to be viable. Everyyear, the expected operating margin (EBIT/Sales) is 20%, the tax rate is 30%, and asset turnover is 5X. Thefounders have $200,000 between them for initial equity funding.
With no other financing, will the $200,000 of founder investment be sufficient to achieve the Year 3 sales target? If not, what level of initial equity investment would be required?