Question

1. Prepare three-year projections for income, expenses, and sources of funds.

- Make realistic assumptions.
- Allow for funding changes at different stages of your companyÂ's growth.
- Present a written rationale for your projections.

2. Indicate your startup costs.
- Detail how startup funds will be used to advance your proposed business
- List current capital and any other sources of funding you may have.
- Document your calculations.
- Use reasonable estimates and/or actual data (where possible).

3. Create a cash-flow statement.

$97,000 will allocated for business operation

$75,000 start up capital

$100,000 guarantee loan,

$150,000 grant from the state government for new printers

Answer 1

Part 1:

Income and expenses projections
Particulars	Year 1		Year 2		Year 3
Incomes:
Sales (Expected to grow @20% per year	40,000.00		48,000.00		57,600.00
Less: Cost of goods sold (40% of sales)	16,000.00		19,200.00		23,040.00
Gross profit		24,000.00		28,800.00		34,560.00
Less: Expenditures
Rent (Fixed rent)	3,500.00		3,500.00		3,500.00
Salaries (Annual increase of 10%)	4,000.00		4,400.00		4,840.00
Depreciation (Fixed expenses)	7,500.00		7,500.00		7,500.00
Office expenses (5% annual increase)	800.00		840.00		882.00
		15,800.00		16,240.00		16,722.00
Earnings Before Interest and Tax (EBIT)		8,200.00		12,560.00		17,838.00
Less: Interest @4% pa. (100000 x4%)		4,000.00		4,000.00		4,000.00
Earnings Before Tax		4,200.00		8,560.00		13,838.00
Less: Tax @30%		1,260.00		2,568.00		4,151.40
Net income		2,940.00		5,992.00		9,686.60

Part 2:

The start-up cost include the acquisition of land and building, printers and equipment necessary for starting the business. Apart from that the acquisition of inventory will also be necessary to sale the items in the market. The sales are expected to increase by 20% annually with cost of goods sold expected to remain 40% of net sales. The rent, depreciation will remain fixed annually whereas office expenses are expected to increase by 5% with expected increase of 10% annually in the amount of salaries. The business will pay its tax liability as per the income statement at the end of each year. The organization belongs to a 30% tax bracket and thus, will pay tax at the rate of 30% on the amount of profit as per the income statement.       

Part 3:

Cash flow statement
Particulars	Year 1		Year 2		Year 3
EBIT	8,200.00		12,560.00		17,838.00
Add:
Depreciation	7,500.00		7,500.00		7,500.00
	15,700.00		20,060.00		25,338.00
Less: Taxes paid	1,260.00		2,568.00		4,151.40
Cash flow from investing activities		14,440.00		17,492.00		21,186.60
Cash flow from investing activities
Purchase of printers	(150,000.00)
Purchase other equipment	(60,000.00)
Purchase land	(80,000.00)
Interest paid			(4,000.00)		(4,000.00)
Cash flow from investing activities		(290,000.00)		(4,000.00)		(4,000.00)
Cash flow from financing activities
Capital introduced	75,000.00
Loan taken	100,000.00
State Government Grant	150,000.00
Repayment of loan	(40,000.00)		(25,000.00)		(25,000.00)
Cash flow from financing activities		285,000.00		(25,000.00)		(25,000.00)
Net cash from business		9,440.00		(7,508.00)		(3,813.40)
Add: Opening cash balance		2,600.00		12,040.00		4,532.00
Closing cash and cash equivalent		12,040.00		4,532.00		718.60