You are considering opening a shop in a nearby mall that will sell specialty T-shirts. T-shirts, containing designs and words selected by customers, will be produced for customers on order. You will need to borrow $25,000 to begin operations. A local bank has agreed to consider a loan and has asked for a summary plan to demonstrate the performance you expect from your company and your ability to repay the loan. You will pay $5.50 for T-shirts and will sell them for $8. The cost of paint and supplies will be $0.50 per shirt. An examination of similar stores at other malls indicates that you should be able to sell an average of 1,000 shirts per month. Rent for your store will be $300 per month. Utilities will be $150 per month, on average. Wages will be $800 per month.

Required

A. Calculate the expected profit of your company for the first year of operation.

B. Explain how a bank loan officer may use your profit projections to help make the lending decision.