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Using the information below, create your 5-year Sales Forecast for the years. You feel your most recent sales are the best predictor of future sales, so you will conduct a 2-year weighted annual sales forecast, and then extend this to 5 years. The forecast should be placed on the Milestone 1 Sales Forecast tab in the highlighted area, showing all support calculations. Additionally, answer the related questions on the Milestone 1 Questions tab.

Next, develop comprehensive forecasted financial statements including income statement and balance sheet for five years using assumptions outlined. Your forecast should incorporate a mix of percent-of-sales and pro forma methods, with detailed calculations and explanations. On the Milestone 2 Metrics tab, compute various financial ratios and funding requirements. Then, analyze these forecasted figures in Milestone 3, including profitability, contribution margins, breakeven points, leverage, cash flows, IRR, NPV, and growth rates, providing detailed calculations and insights.

Paper For Above instruction

The innovative product “Dura-Clear windows”—which never need washing and resist pollution, pollen, dirt, dust, bird droppings, fingerprints—has proven successful in the residential market over the past three years. Now, with increasing demand from commercial builders, the company faces the challenge of scaling operations to meet larger orders, requiring significant expansion and increased funding. This transition from a small-scale operation to a larger enterprise demands careful financial planning, forecasting, and analysis to attract investment from potential backers such as the Shark Tank investors, or "sharks".

The core of this exercise involves developing detailed financial forecasts to demonstrate profitability and potential return on investment. The initial step is to produce a 2-year weighted sales forecast based on prior data, which extends into a 5-year projection. The key is to use appropriate methods—weighted averages, percent-of-sales, and pro forma approaches—grounded in realistic assumptions and market conditions.

In constructing these forecasts, it is crucial to account for several variables. These include sales increases driven by expanded operations, price adjustments for inflation, costs of goods sold (COGS), selling and administrative expenses, interest, taxes, and various balance sheet components such as accounts receivable, inventory, plant and equipment, liabilities, and equity. Assumptions provided, like the $1 million equity funding in exchange for 25% ownership, a required 9% return for investors, and depreciation schedules, underpin all calculations.

Accurate forecasted financial statements — income statements and balance sheets — are essential for assessing profitability, liquidity, and growth potential. These financials enable calculation of key performance ratios such as profit margin, return on assets (ROA), return on equity (ROE), current and quick ratios, debt ratios, and interest coverage. These metrics help evaluate whether the business is financially sound and attractive to investors.

Furthermore, determining the 'required new funds' (RNF) involves assessing additional working capital needs, capital expenditures, and debt repayments. These figures inform the amount of funding the company must secure to support its expansion. As part of the analysis, the forecasted ratios and financial metrics reveal trends—such as improving profitability, increasing leverage, and liquidity status—that influence the perception of the company's feasibility for investment.

Finally, detailed calculations of cash flows, including operating cash flow, free cash flow, and the payback period, alongside investment return measures like IRR and NPV, are performed to assess whether expanding funding makes strategic and financial sense. These indicators help convince potential investors—like the sharks—of the attractiveness of their investment and clarify whether the projected returns justify the risk.

Through comprehensive financial modeling, ratio analysis, and strategic evaluation, I will demonstrate how the company’s growth plans are financially viable, profitable, and poised to generate substantial investor value while addressing the inherent risks and assumptions involved in scaling operations of “Dura-Clear windows”.

References

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