Prepare a break-even analysis.
Choose the type of forecasting model to be used.
Project 5 year’s income statements.
Decide on the best funding method.
Based on the funding method chosen, prepare 5-year balance sheets, using ratios, etc.
Project Cash Flows from business
Using the traditional methods of Capital Budgeting evaluation, such as Net Present Value, etc., determine whether the business is one that should be undertaken.
Based on all of the above determine the projected value of the business after 5 years of operations. This will require that you project the cash flows of the business beyond 5 years. Please make sure to explain the method used for such projections.
CASH ON HAND
Joe's Savings $30,000
Profit from last year $8,472
EXPENSES FROM LAST YEAR
T-Shirt Designs $550
Shopify $348
Cost of Shirts $4,500
Online shop template $30
Equipment $200
Shipping $2,700
Marketing & Advertising $1,200
ADDITIONAL EXPENSES FOR YEARS ONE THOUGH FIVE
Year 1 Year 2 Year 3 Year 4 Year 5
Office Space 0 0 $12,000 $12,000 $12,000
Employee(s) 0 $5,200 $10,400 $20,800 $20,800
Office Furniture $200 $250 $250 $250 $250
T-Shirt Designs $2,640 $2,640 $2,860 $3,300 $3,850
Shirts & Printing $12,825 $24,300 $28,188 $33,048 $38,257
New Computer $1,000 0 0 0 0
New Printer $200 0 0 0 0
Inventory Shelving $1,000 $1,000 $1,000 $1,000 $1,000
Office Supplies $300 $300 $300 $300 $300
Shipping $6,750 $13,500 $14,900 $17,400 $20,450
Trailer for Events $8,000 $0 $0 $0 $0
Gas to and from Events $1,200 $1,200 $1,600 $1,600 $1,600
Hotel at events $600 $600 $800 $800 $800
Event Space $1,500 $2,000 $2,500 $2,500 $2,500
Misc. Equipment $500 $500 $500 $500 $500
Vinyl Banners $300 $0 $400 $0 $0
Utilities $500 $1,000 $1,200 $1,200 $1,200
Internet Service $0 $0 $600 $600 $600
Phone Service $0 0 $1,200 $1,200 $1,200
Joe’s Salary $0 $30,000 $60,000 $60,000 $60,000
Website Advertising $18,000 $22,000 $11,000 $8,000 $6,000
Expected Sales
Year 1 Year 2 Year 3 Year 4 Year 5
T-shirts $54,000 $108,000 $129,600 $155,520 $186,624