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You and your business partners are considering applying for a franchise. If approved, you expect startup costs to be $650,000 in equipment that is depreciable. You will use a 5-year MARCUS method to depreciate the $650,000 equipment. Your plan is to start and operate the business for 6 years at which time you expect to sell the business for $1,000,000. You expect to initially have working capital needs of $25,000, but these have additional needs by $6,000 per year in the 6 years. You expect sales in the first year to be $350,000 and that sales will grow by 12% per year. You project annual fixed operating expenses of $50,000 in the first year. These fixed expenses will grow by $5,000 per year. Your annual variable operating expenses are expected to be 50% of sales. You expect to pay taxes of 21%. Assume your required return is 12%. Should you apply for a Guthrie's Franchise? Prepare a report responding to the following prompts: 1. Prepare pro forma income statements and operating cash flow projections. Explain your pro forma statements in your report. A A Wap Tot Condition Cut Copy I format Printer pboard A 5 - % 9 Font Alignment Number =D6*(16.12) N M B D E G A H a. Income statement 1 2 5 6 year sales +0.000=06"(15.12 4 5 26 17 29 32 16 29 30 Participants Chat Share Scre Unmute Start Video x & to -D6*0.5 D F m G B H a. Income statement 3 4 5 6 year sales fixed costs variable cost 150,000 50,000 -D6*0. 2 392000 55,000 BTU . mat Painter Merge 5 % - Conditional to Formatting ard IS Font Alignment Number X ClD26 D E F G H K M 650,000 a. Income statement 3 4 5 6 year sales fixed costs variable cost Depreciation 2 350,000 50,000 175000 =C1 D26| 2 392000 55,000 196000 Drate 32% 19.20% 11.52 11.52% 5.76 =D6-07-09 F G H 650,000 a. Income statement 3 4 5 6 year sales fixed costs variable cost Depreciation EBIT 2 350,000 392000 50,000 55,000 175000 196000 ID2000 208000 =D6-07-09 Drate 20% 3296 19.20% 11.52 11.52% 5.76% w F G H K 650,000 a. income statement 3 4 5 6 year sales fixed costs variable cost Depreciation EBIT 2 350,000 392000 50,000 55,000 196000 130000 208000 =D6-07-09-08 17.00 Date 20% 32% 19.20% 11.52% 11.52% 5.763 Font Alignment Number Clipboard 0 =D6-07-08-09 D E F C G H K B 650,000 a. income statement year 3 4 5 6 sales fixed costs variable cost Depreciation EBIT 1 2 350,000 392000 50,000 55,000 175000 196000 130000 208000 -5,000. 67,000 10 11 12 13 14 15 16 17 18 19 20 21 24 25 Drate 20% 32% 19. 20% 11.52% 11.52 5.765 27 LE Pate Paste Copy Format BTA EEE Mg Center $ 96 DP Clipboard Font Alignment Number 011 010-011 A B c D E F G H 1 650,000 a. income statement 1 2 3 4 5 6 7 8 9 10 3 4 5 6 year sales fixed costs variable cost Depreciation EBIT Tax Net income 1 350,000 50,000 175000 130000 -5,000 -1050 2010-011 2 392000 55,000 196000 208000 67,000 - 14070 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 20 29 30 31 32 33 34 35 36 37 36 39 40 Drate 20 IN 19.20 11:52 5. Font Alignment Number D E F G H K 650,000 a. Income statement 4 5 5 3 439040 6 year sales fixed costs variable cost Depreciation EBIT Tax Net income 1 350,000 50,000 175000 130000 -5,000 -1050 -3,950 2 392000 55,000 196000 208000 -67,000 14070 -52.930 OCF=EBIT+D-Tox OCF 126,050 155,070 Date 20% 32% 19.205 11.52% 11.32% 5.70 + 2 Chat Shar Participants Unmute Start Video

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