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

(an Excel File - Provided as a separate file in this Week 7 Content Folder). 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

30% Year X + 1

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.

Your Name Here
	Year X - 1		Year X E		Year X + 1 E
Revenue	$ 1,440,000	100.0%
Cost of Goods Sold	921,600	64.0%
Gross Profit	518,400	36.0%
Selling	158,400	11.0%
General and Administrative	108,000	7.5%
Research and Development	40,000	2.8%
Depreciation and Amortization	30,000	2.1%
Total Operating Expenses	336,400	23.4%
Operating Income	182,000	12.6%
Interest costs	5,000	0.3%
Interest income	4,000	0.3%
Pre-Tax Income	181,000	12.6%
Tax (35%)	63,350	4.4%
Net Income	$ 117,650	8.2%
Earnings Per Share - Basic	$ 0.04
Earnings Per Share - Diluted
Shares Outstanding	3,000,000
Shares For Diluted
A Options	500,000
Ex Price	$ 1.00
Stock Price	$ 5.00
Proceeds	$ 500,000
New Share structure	3,500,000
Buy Back Shares	100,000
Shares for Diluted Calculations	3,400,000
			Year X E		Year X + 1 E
Revenue			$ -		$ -
Gross Margin
Depreciation and Amortization			-		-
Operating Income			-		-
Operating Margin
Interest Expense			-		-
Net Income			$ -		$ -
Basic EPS			$ -		$ -
Diluted EPS			$ -		$ -
Shares used to calculate Diluted EPS			-		-