Scenario Requirements: Scroll To See All

Scenario Requirementsscenario Requirementsscroll To See All 3 Mil

Scenario & Requirements SCENARIO & REQUIREMENTS (Scroll to see all 3 Milestones) SCENARIO: You invented “Dura-Clear windows” that never need washing! Nothing sticks to them – not pollution, pollen, dirt, dust, bird droppings, fingerprints, nothing. You’ve invested all your own savings, your parents’ savings, and some of your friends’ savings as well into the R&D, production, and start-up of your business. It’s been three years since you started selling your windows primarily to single-family homeowners, but now apartment building contractors across the nation have been requesting your windows. Unfortunately, you’re already operating at full capacity.

It's time to make the switch from single-family homes to commercial buildings, but to do so requires a large infusion of funding for expansion. You need more of everything: space, equipment, employees, etc. Ever the optimist, you applied to the TV show Shark Tank--where entrepreneurs compete for funding from angel investors ("sharks")--to see if a shark will invest in your company and serve as a mentor as well. To your surprise, you were accepted to the show! You've already prepared most of your marketing and sales pitches, and now it's time to put together your forecasted financial statements.

You intend to show the sharks that backing your business would be a very profitable investment. You also need to determine how much funding to ask for in exchange for how much ownership you'll give up. The following 2 Notes apply to all 3 Milestones! NOTE 1: You must show all your work. Either your computations are in the cell behind your result, or you must place them out to the right on the Forecasted Financials tab.

If you choose to show your work out to the right, show all steps and label your work clearly so it can be understood. NOTE 2: Do not round computations until you have found your final answer. Then, round your result to the nearest dollar. No pennies!

Paper For Above instruction

In this assignment, I will develop comprehensive financial forecasts for Dura-Clear Windows, LLC, to prepare a compelling presentation for potential investors on Shark Tank. This process involves creating detailed sales forecasts, projecting income statements and balance sheets, and analyzing profitability and financial viability to demonstrate the business's potential for growth and profitability.

The scenario begins with an innovative product—a window that remains perpetually clean without washing—designed to appeal initially to homeowners, but now expanding into commercial markets. To facilitate this expansion, significant funding is necessary. Therefore, a thorough financial forecast is essential to convince investors of the venture's profitability and to determine the appropriate funding request and equity offer.

First, a sales forecast must be established to project revenues over the next five years, incorporating recent sales data, weighted forecasting methods, and future assumptions about market growth. For this, historical sales figures serve as the foundation, adjusted with weightings (W1=0.2, W2=0.8) to predict upcoming sales accurately. The forecast must show the anticipated increase in sales and market penetration, considering factors like increased demand from commercial buildings versus residential sales.

Next, creating forecasted income statements and balance sheets involves integrating assumptions about costs, expenses, capital expenditures, and financing. The income statement components include sales, cost of goods sold (COGS), operating expenses—including fixed costs such as rent and depreciation—and interest and taxes. The balance sheet will reflect projected assets like cash, accounts receivable, inventory, and plant and equipment, alongside liabilities such as accounts payable, accrued expenses, long-term debt, and stockholders' equity components (common stock, paid-in capital, retained earnings).

The analysis extends to calculating key financial metrics, including profitability ratios (profit margin, ROA, ROE), liquidity ratios (current and quick ratios), leverage ratios (debt-to-assets), and coverage ratios (interest coverage). These metrics assess the financial health of the company, compare industry standards, and identify strengths or areas of concern.

Furthermore, determining the estimated funds needed (Required New Funds - RNF) involves analyzing changes in working capital, capital expenditures, and existing resources to establish whether the proposed funding request ($1 million) is sufficient. If not, alternative financing options are considered, such as internal cash flows or retained earnings.

For the profitability analysis, calculations of breakeven sales, contribution margin, and operating leverage are crucial to demonstrate how much sales must increase to cover fixed costs and reach profitability. This is vital for the Shark investors to understand the risk and return trade-offs.

Finally, the evaluation of potential returns through Payback period, Internal Rate of Return (IRR), and Net Present Value (NPV) are performed based on projected cash flows. These metrics illustrate the attractiveness of the investment, helping to justify the funding request and ownership stake for the investors.

This comprehensive financial modeling and analysis aim to present a compelling case that highlights the profitability, growth potential, and strategic viability of Dura-Clear Windows, encouraging the Sharks to invest confidently in the expansion of this innovative product.

Result:

The detailed forecasts and ratios, along with calculated metrics such as IRR, NPV, and payback period, provide evidence of the company's strong potential. Adjustments based on industry comparison and sensitivity analysis further refine the forecast, reinforcing confidence in the projected figures and supporting the funding request to ensure successful transformation into a major supplier of commercial windows.

References

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