Question

In: Accounting

Six Key Financial Assumptions Startup cost – $350,000 $150,000 to purchase building $10,000 for renovations $75,000...

Six Key Financial Assumptions

  • Startup cost – $350,000
    • $150,000 to purchase building
    • $10,000 for renovations
    • $75,000 for supplies
    • $115,000 for additional expenses
  • Sales and Revenue - $600,000
    • $50,000 in sales per month
    • Based on 50 jobs at $250 per job
  • Operating costs - $156,000
    • $13,000 per month
    • Based on supplies, utilities, and staff
  • Borrowing - $350,000
    • Based on money needed for startup cost
    • Interest owed to bank 6%
  • Equity returns – 2% compounding annually
    • Based on 2% real estate growth assumption
  • Company value ???

Balance sheet

31-Dec-2020

Assets

Cash :                                                  $000,000

Accounts Receivable:                          $000,000

Long Term Assets:                              $000,000

Total:                                                   $000,000

Liabilities & Equity

Accounts Payable:                              $000,000

Borrowing:                                          $000,000

Retained Earnings:                              $000,000

(First year so no retained earnings from first year)

Earnings:                                             $000,000

Total:                                                   $000,000

Using the information from the key assumptions please solve the company value portion as well as the balance sheet for the first year of the start up company.

Solutions

Expert Solution

Answwer to question

Company value
Income Statement Amount
Sales and Revenue $      6,00,000.00
Purchase
Supllies $         75,000.00
Additiona Expenses $      1,15,000.00
Operating costs $      1,56,000.00
supplies, utilities, and staff $      1,56,000.00
Interest @ 6% $         21,000.00
Profit $         77,000.00
Equity returns 2%
Company value $   38,50,000.00
Balance sheet as on 31-Dec-2020
Cash $      3,50,000.00
Accounts Receivable $      6,00,000.00
Long Term Assets
Building $      1,50,000.00
Renovation $         10,000.00
Total $   11,10,000.00
Liabilities & Equity
Accounts Payable
For Building $      1,60,000.00
For Suplies $         75,000.00
Additional Expenses $      1,15,000.00
Operating costs $      1,56,000.00
supplies, utilities, and staff $      1,56,000.00
Interest Payable $         21,000.00
Borrowing $      3,50,000.00
Retained Earnings $                         -  
(First year so no retained earnings from first year)
Earnings:        $         77,000.00
Total $   11,10,000.00
Note
During the year no payment made
during the year no payment Received

ekkarill92 answered 1 year ago
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