Using the PowerPoint Lecture Creating Projections, create a new set of projections for Years X E and X +1 E.

For this Homework Assignment, your work should be completed on the Week 7 Homework Worksheet (attached to this file). 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 E

30% Year X + 1 E

• 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.

Week 7 Homework worksheet - Spring 2020 - Microsoft Excel File Page Layout Formulas Review View Auto Times New Roman - 12 AN Wrap Text Genel Bad Good Neutral Calculation Paste Explanatory... Followed Hy Hyperlink Normal * Conditional Format check Cell Formatting as able Input Home % Cut Copy Format Painter Clipboard M53 Insert Delete Format Merge & Center $ .% Number 2 Clear Sort & Find Filter Select Editing Font Alignment F G H J K 0 P Q R S T U V W Y Z Your Name Here M N Use this new set of assumptions . Revenue growth: 30% Year XE 30% Year X+1E Year XE Year X+1E Revenue 4 Cost of Goods Sold 5 Gross Profit Year X-1 1,440,000 100.0% 921,600 64.096 518,400 36.096 11.096 7.596 7 Selling 8 General and Administrative 9 Research and Development 10 Depreciation and Amortization 11 Total Operating Expenses 12 13 Operating Income 158,400 108,000 40,000 30.000 336,400 1% improvement in Gross Margin for Year XE (from year X-1). No futher change in the Gross Margin for Year X+I. 1% improvement in Selling in Year XE. Same level in Year X+1 E. G&A remains constant on a common size basis. $10,000 increase in R&D in XE . 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 XE 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 XE. There are no other options, warrants or convertible securities. The average stock price for Year XE and Year X+1 E is projected to be $5.00 . All other interest payments, interest income and tax rates remain the same. 182.000 12.694 15 Interest costs 16 Interest income 5,000 4,000 12.6% 181,000 63,350 117,650 $ 18 Pre-Tax Income 19 Tax (35) 20 Net Income 21 22 Earrings Per Share - Basic 23 Earnings Per Share - Diluted $ 0.04 3,000,000 $ $ 500,000 1.00 5.00 25 Shares Outstanding 26 Shares For Diluted 27 28 A Options 29 Ex Price 30 Stock Price 31 32 Proceeds 33 New Share structure 34 Buy Back Shares 35 Shares for Diluted Calculations 36 37 Week 7 Homework worksheet - Spring 2020 - Microsoft Excel File Page Layout Formulas Review View Auto Times New Roman - 12 AN Wrap Text Genel Bad Good Neutral Calculation Paste Explanatory... Followed Hy Hyperlink Normal * Conditional Format check Cell Formatting as able Input Home % Cut Copy Format Painter Clipboard M53 Insert Delete Format Merge & Center $ .% Number 2 Clear Sort & Find Filter Select Editing Font Alignment F G H J K 0 P Q R S T U V W Y Z Your Name Here M N Use this new set of assumptions . Revenue growth: 30% Year XE 30% Year X+1E Year XE Year X+1E Revenue 4 Cost of Goods Sold 5 Gross Profit Year X-1 1,440,000 100.0% 921,600 64.096 518,400 36.096 11.096 7.596 7 Selling 8 General and Administrative 9 Research and Development 10 Depreciation and Amortization 11 Total Operating Expenses 12 13 Operating Income 158,400 108,000 40,000 30.000 336,400 1% improvement in Gross Margin for Year XE (from year X-1). No futher change in the Gross Margin for Year X+I. 1% improvement in Selling in Year XE. Same level in Year X+1 E. G&A remains constant on a common size basis. $10,000 increase in R&D in XE . 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 XE 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 XE. There are no other options, warrants or convertible securities. The average stock price for Year XE and Year X+1 E is projected to be $5.00 . All other interest payments, interest income and tax rates remain the same. 182.000 12.694 15 Interest costs 16 Interest income 5,000 4,000 12.6% 181,000 63,350 117,650 $ 18 Pre-Tax Income 19 Tax (35) 20 Net Income 21 22 Earrings Per Share - Basic 23 Earnings Per Share - Diluted $ 0.04 3,000,000 $ $ 500,000 1.00 5.00 25 Shares Outstanding 26 Shares For Diluted 27 28 A Options 29 Ex Price 30 Stock Price 31 32 Proceeds 33 New Share structure 34 Buy Back Shares 35 Shares for Diluted Calculations 36 37