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Break-Even (SC1)

BUSN-460-13255: FINANCE TEAM BREAK-EVEN ANALYSIS
1) BREAK-EVEN DEFINITION					http://www.forresidentialpros.com/article/10348913/break-even-sales-volume
If a company wants to stay in business, it must know and understand its break-even sales volume. This is the amount a company must produce and sell to cover its overhead. This is neither a profit or a loss, just the price of staying afloat.
2) BREAK-EVEN ANALYSIS
2.1) Contribution Margin
The Contributions margin is the “selling price less the variable costs per unit.” In essence, it is the amount of money the sale of each unit or tablet will contribute to covering total fixed costs. To clarify variable costs, represents the amount it costs to buy or create the product that is being sold. Variable costs can include raw material costs, direct labor, sales commissions, freight costs, packaging and energy costs associated with producing the AINO Tablet.
2.2) Break even volume
Now that the Contributions Margin is known, the break-even sales volume can be figured out. To calculate, we need the annual fixed costs. The fixed cost is the costs of being in business, namely the company’s overhead. These costs don’t vary with the level of output of a producing the tablet, and would be incurred if production were to cease. This includes rent, insurance, depreciation, salaries, property taxes and any other costs that aren’t directly associated with production of a project.
BREAK-EVEN POINT IN UNITS - VOLUME
AINO
Production Activity	Unit of Measure	Qty/ Amount	Schedule
					Sales discounts are not reported as an expense. Rather, sales discounts are reported as a reduction of gross sales. In other words, Sales or Gross Sales minus Sales Discounts and Sales Returns and Sales Allowances = Net Sales.
Selling Price	Per Unit	$ 179.00
Variable Overhead	Per Unit	$ 50.00
Fixed Overhead	Per Unit	$ 80.00
Fixed Overhead	Per Year	$ 72,000,000.00
Fixed Selling and Administrative	Per Year	$ 14,129,100.00	SC2: Discounts + Returns
Units Produced	Per Year	900,000	SC2
Units in beginnig finished goods	-
Units Sold	Per Year	850,000
Selling Price	$ 179.00
Variable cost (Per Unit)	$ 50.00
Total Fixed cost	$ 86,129,100.00
Contribution Margin (Per Unit)	$ 129
Break-even point	667,667	Total fixed costs+Target profit/Contribution Margin per Unit
		Identify in Month
BREAK-EVEN POINT IN SALES - DOLLARS
AINO
Production Activity	Unit of Measure	Qty/ Amount	Schedule
Selling Price	Per Unit	$ 179.00
Variable Overhead	Per Unit	$ 50.00
Fixed Overhead	Per Unit	$ 80.00
Fixed Overhead	Per Year	$ 72,000,000.00
Fixed Selling and Administrative	Per Year	$ 14,129,100.00	SC2: Discounts + Returns
Units Produced	Per Year	900,000	SC2
Units in beginnig finished goods	-
Units Sold	Per Year	850,000
Selling Price	$ 179	Contribution
Variable cost (Per Unit)	$ 50	34%	146	$ 33
Total Fixed cost (Per Unit)	$ 96	66%
Contribution Margin (Per Unit)	$ 129
Contribution Margin Ratio	0.72
Total Fixed Cost (Fixed cost * Units Produced)	86,129,100
Break-even Point	$ 119,512,472	Total fixed costs+Target profit/Contribution Margin Ratio
		Identify in Months
BREAK-EVEN POINT
AINO
Production Activity	Unit of Measure	Qty/ Amount	Schedule
Selling Price	Per Unit	$ 179.00
Variable Overhead	Per Unit	$ 50.00
Fixed Overhead	Per Unit	$ 80.00
Fixed Overhead	Per Year	$ 72,000,000.00
Discounts & Returns	Per Year	$ 14,129,100.00	SC2
Units Produced	Per Year	900,000	SC2
Units in beginnig finished goods	-
Units Sold	Per Year	850,000
Selling Price	$ 179	Contribution
Variable cost (Per Unit)	$ 50	34%				146
Total Fixed costs	$ 86,129,100	66%
Total Fixed cost (Per Unit)	$ 96	66%
Contribution Margin (Per Unit)	$ 129
Break-even point	667,667	Total fixed costs+Target profit/Contribution Margin per Unit
Contribution Margin Ratio	0.72
Total Fixed Cost (Fixed cost * Units Produced)	86,129,100
Break-even Point	$ 119,512,472	Total fixed costs+Target profit/Contribution Margin Ratio
							Identify in Months
	Sales Volume	Net Income
	Y1	Y2
	900000	$ 151,247,372
M1	75,000	$ 12,603,948
M2	150,000	$ 25,207,895
M3	225,000	$ 37,811,843
M4	300,000	$ 50,415,791
M5	375,000	$ 63,019,738
M6	450,000	$ 75,623,686
M7	525,000	$ 88,227,633
M8	600,000	$ 100,831,581
M9	675,000	$ 113,435,529
M10	750,000	$ 126,039,476
M11	825,000	$ 138,643,424
M12	900,000	$ 151,247,372
M13
M14
M15
M16

http://www.forresidentialpros.com/article/10348913/break-even-sales-volume

SalesBudget (SC2)

BUSN-460-13255: FINANCE TEAM: SALES BUDGET
1.Sales Analysis using Market Growth, Direct, Indirect Sales & Discounts
				$ 20.59	$ 20.59	$ 20.59	$ 20.59	$ 20.59
		Factors	Schedule	Year 1	Year 2	Year 3	Year 4	Year 5
Tablet	Marketing & Sales - Tablet Price		1	$ 179	$ 179	$ 179	$ 179	$ 179	USING INFORMATION FROM SALES TEAM
	Marketing & Sales Dept Projected Sales Growth per year				20%	25%	20%	20%	Confirm with Sales team
	Marketing & Sales Dept Projected Sales		1	900,000	1,080,000	1,350,000	1,620,000	1,944,000
	Indirect Sales % from Total Production			70%	65%	60%	60%	60%	The goal is to reduce indirect sales
	Indirect Sales Price ( Discount Applied - Retail Discount)	11.5%		$ 158.42	$ 158.42	$ 158.42	$ 158.42	$ 158.42
	Indirect Sales Projected Units			630,000	702,000	810,000	972,000	1,166,400
	Indirect Sales Projected Sales			$ 99,801,450	$ 111,207,330	$ 128,316,150	$ 153,979,380	$ 184,775,256
	Direct Sales % from Total Production			30%	35%	40%	40%	40%
	Direct Sales Price			$ 179.00	$ 179.00	$ 179.00	$ 179.00	$ 179.00
	Direct Sales Projected Units			270,000	378,000	540,000	648,000	777,600
	Direct Sales Discount (Free Shipping)	$ 4.00		$ 1,080,000	$ 1,512,000	$ 2,160,000	$ 2,592,000	$ 3,110,400
	Direct Sales Projected Sales			$ 47,250,000	$ 66,150,000	$ 94,500,000	$ 113,400,000	$ 136,080,000
	Projected Sales Return Units	0.05%		450	540	675	810	972
	Project Sales Return Amount			$ 80,550	$ 96,660	$ 120,825	$ 144,990	$ 173,988
	(+) Total Projected Gross Sales: Tablet			$ 161,100,000	$ 193,320,000	$ 241,650,000	$ 289,980,000	$ 347,976,000
	(-) Total Projected Discounts - Indirect Sales: Tablet			$ 12,968,550	$ 14,450,670	$ 16,673,850	$ 20,008,620	$ 24,010,344
	(-) Total Projected Discounts - Direct Sales: Tablet			$ 1,080,000	$ 1,512,000	$ 2,160,000	$ 2,592,000	$ 3,110,400
	(-) Total Projected Sales Returns: Tablet			$ 80,550	$ 96,660	$ 120,825	$ 144,990	$ 173,988
	(=) Net Sales (Tablet)			$ 146,970,900	$ 177,260,670	$ 222,695,325	$ 267,234,390	$ 320,681,268
Peripherals	Peripherals package Price			$ 30	$ 30	$ 30	$ 30	$ 30
	Peripherals package Price for indirect distribution			$ 4.58	$ 4.58	$ 4.58	$ 4.58	$ 4.58	85%
	Peripherals sales % for indirect distribution			50%	50%	45%	40%	40%
	Peripherals units - Indirect distribution			315,000	351,000	364,500	388,800	466,560
	Peripherals sales - Indirect distribution			$ 1,442,700	$ 1,607,580	$ 1,669,410	$ 1,780,704	$ 2,136,845
	Peripherals sales % for direct distribution			35%	35%	35%	35%	35%
	Peripherals units - direct distribution			94,500	132,300	189,000	226,800	272,160
	Peripherals sales - direct distribution			$ 2,835,000	$ 3,969,000	$ 5,670,000	$ 6,804,000	$ 8,164,800
	Projected Sales Return Units	0.01%		41	48	55	62	74
	Project Sales Return Amount			$ 1,229	$ 1,450	$ 1,661	$ 1,847	$ 2,216
	(+) Total Projected Gross Sales: Peripherals			$ 12,285,000	$ 14,499,000	$ 16,605,000	$ 18,468,000	$ 22,161,600
	(-) Total Projected Discounts - Indirect Sales: Peripherals			$ 8,007,300	$ 8,922,420	$ 9,265,590	$ 9,883,296	$ 11,859,955
	(-) Total Projected Sales Returns: Peripherals			$ 1,229	$ 1,450	$ 1,661	$ 1,847	$ 2,216
	(=) Net Sales (Peripherals)			$ 4,276,472	$ 5,575,130	$ 7,337,750	$ 8,582,857	$ 10,299,429
	(=) TOTAL NET SALES			$ 151,247,372	$ 182,835,800	$ 230,033,075	$ 275,817,247	$ 330,980,697
2.Sales Forecast
			NET SALES FORECAST
			Item	Year 1	Year 2	Year 3	Year 4	Year 5
			Tablet Sales	146970900	177260670	222695325	267234390	320681268
			Peripherals Sales	4276471.5	5575130.1	7337749.5	8582857.2	10299428.64
			Grand Total	151247371.5	182835800.1	230033074.5	275817247.2	330980696.6
			GROSS SALES FORECAST
			Item	Year 1	Year 2	Year 3	Year 4	Year 5
			Tablet Sales	161100000	193320000	241650000	289980000	347976000
			Peripherals Sales	12285000	14499000	16605000	18468000	22161600
			Grand Total	173385000	207819000	258255000	308448000	370137600

NET SALES FORECAST

Tablet Sales Year 1 Year 2 Year 3 Year 4 Year 5 146970900 177260670 222695325 267234390 320681268 Peripherals Sales Year 1 Year 2 Year 3 Year 4 Year 5 4276471.5 5575130.0999999996 7337749.5 8582857.1999999993 10299428.640000001 Grand Total Year 1 Year 2 Year 3 Year 4 Year 5 151247371.5 182835800.09999999 230033074.5 275817247.19999999 330980696.63999999

Sales Amount

GROSS SALES FORECAST

Tablet Sales Year 1 Year 2 Year 3 Year 4 Year 5 161100000 193320000 241650000 289980000 347976000 Peripherals Sales Year 1 Year 2 Year 3 Year 4 Year 5 12285000 14499000 16605000 18468000 22161600 Grand Total Year 1 Year 2 Year 3 Year 4 Year 5 173385000 207819000 258255000 308448000 370137600

Sales Amount

StartUp (SC3)

BUSN-460-13255: FINANCE TEAM: STARTUP BUDGET
1) START-UP DEFINITION
The initial start-up budget identified the required cash flows to enable the entrepreneur to open the business.
2) START-UP ANALYSIS
Initial start-up Cash Budget
			Schedule/ Form	Year 0	Comments / Supporting Link
Start-up Costs:
	Application to reserve a name			$ 300	http://www.cyberdriveillinois.com/publications/pdf_publications/llc115.pdf
	Business License			$ 500	http://www.cyberdriveillinois.com/publications/pdf_publications/llc455.pdf
	Configuration of the facility			$ 15,000,000	Given Cost
	General Business Insurance, estimated at $12,500 per year			$ 125,000	http://www.localinsurance.com/illinois/
	Start-up Inventory (Two months)		SC 2	$ 5,250,000	Assuming $35 raw material per unit
	1 month Rent and Deposit (includes Utilities) - $12.5 SF/Year - 50,230 SF			$ 104,646	http://www.loopnet.com/Listing/16275927/5400-5420-Newport-Dr-Rolling-Meadows-IL/
	Recruting costs		Appendix	$ 13,000	Provided by HR team
	Labor Cost (Two Months)			$ 478,000
		Operations & Logistics	Appendix	$ 206,000	Provided by Operation's team
		Customer Support	Appendix	$ 152,000	Provided by Customer Support team
		HR + Finance + Sales	Appendix	$ 120,000	Provided by cross-functional Teams
		Project Planning	Appendix	$ 60,300	CONFIRM WITH CROSS-FUNCTIONAL TEAM ( HR = 14,400; CS= 9,900; FIN=12,000; PM=###; OPER=###)
	Advertising			$ 750,000	Provided by Sales & Marketing --- CONFIRM !!
Total Cash budget				$ 22,259,746

http://www.cyberdriveillinois.com/publications/pdf_publications/llc455.pdf http://www.cyberdriveillinois.com/publications/pdf_publications/llc115.pdf http://www.loopnet.com/Listing/16275927/5400-5420-Newport-Dr-Rolling-Meadows-IL/

Depreciation(SC4)

BUSN-460-13255: FINANCE TEAM: DEPRECIATION
Equipment depreciation
Notes:
Equipment is depreciated on a straight-line basis over 5 years.
Equipment total is equal		$ 9,000,000
Straight-Line Method
Year	Annual Depreciation	Year-End Book Value
1	$ 1,800,000	$ 7,200,000
2	$ 1,800,000	$ 5,400,000
3	$ 1,800,000	$ 3,600,000
4	$ 1,800,000	$ 1,800,000
5	$ 1,800,000	$ - 0
Total	$ 9,000,000
Equipment depreciation
Notes:
Equipment is depreciated on a straight-line basis over 7 years.
Equipment total is equal		$ 9,000,000
Straight-Line Method
Year	Annual Depreciation	Year-End Book Value
1	$ 1,285,714	$ 7,714,286
2	$ 1,285,714	$ 6,428,571
3	$ 1,285,714	$ 5,142,857
4	$ 1,285,714	$ 3,857,143
5	$ 1,285,714	$ 2,571,429
6	$ 1,285,714	$ 1,285,714
7	$ 1,285,714	$ - 0
Total	$ 9,000,000

CGS (SC5)

BUSN-460-13255: FINANCE TEAM: CGS BUDGET
1) CGS ANALYSIS
		Schedule	Year 1	Year 2	Year 3	Year 4	Year 5
Tablet	Production Units: Tablet	SC2	900,000	1,080,000	1,350,000	1,620,000	1,944,000
	Total Fixed Cost		$ 72,000,000	$ 86,400,000	$ 109,350,000	$ 132,840,000	$ 161,352,000
	Fixed Cost per Unit	SC1	$ 80.00	$ 80.00	$ 81.00	$ 82.00	$ 83.00
	Total Variable Cost	SC1	$ 45,000,000	$ 54,000,000	$ 67,500,000	$ 81,000,000	$ 97,200,000
	Variable Cost	SC1	$ 50	$ 50	$ 50	$ 50	$ 50
Peripherals	Production Units: Peripherals	SC2	409,500	483,300	553,500	615,600	738,720
	Total Fixed Cost		NA	NA	NA	NA	NA
	Fixed Cost per Unit		NA	NA	NA	NA	NA
	Total Variable Cost	SC1	$ 696,150	$ 821,610	$ 940,950	$ 1,046,520	$ 1,255,824
	Variable Cost	SC2	$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70
	(+) Total Fixed Cost		$ 72,000,000	$ 86,400,000	$ 109,350,000	$ 132,840,000	$ 161,352,000
	(+) Total Variable Cost		$ 45,696,150	$ 54,821,610	$ 68,440,950	$ 82,046,520	$ 98,455,824
	(+) Cost of Good Sales: Tablet		$ 117,000,000	$ 140,400,000	$ 176,850,000	$ 213,840,000	$ 258,552,000
	(+) Cost of Good Sales: Peripherals		$ 696,150	$ 821,610	$ 940,950	$ 1,046,520	$ 1,255,824
	(=) Cost of Good Sales		$ 117,696,150	$ 141,221,610	$ 177,790,950	$ 214,886,520	$ 259,807,824
	Cost of Good Sales Per Unit: Tablet		$ 130.00	$ 130.00	$ 131.00	$ 132.00	$ 133.00
	Cost of Good Sales Per Unit: Peripherals		$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70

Expenses (SC6)

BUSN-460-13255: FINANCE TEAM: EXPENSES
1) EXPENSES ANALYSIS
		Schedule	Year 1	Year 2	Year 3	Year 4	Year 5
Tablet	Production Units: Tablet	SC2	900,000	1,080,000	1,350,000	1,620,000	1,944,000
	Total Fixed + Variable Expenses	SC5	$ 117,000,000	$ 140,400,000	$ 176,850,000	$ 213,840,000	$ 258,552,000
	Cost of Good Sales Per Unit: Tablet	SC5	$ 130.00	$ 130.00	$ 131.00	$ 132.00	$ 133.00
	Direct Expenses Cost per Unit	SC5	$ 50.00	$ 50.00	$ 50.00	$ 50.00	$ 50.00
	Direct Expenses %		38.5%	38.5%	38.2%	37.9%	37.6%
	Direct Expenses Total	SC5	$ 45,000,000	$ 54,000,000	$ 67,500,000	$ 81,000,000	$ 97,200,000
	Operating Expenses Cost per Unit		$ 27.30	$ 28.60	$ 30.13	$ 31.68	$ 31.92
	Operating Expenses %		21.0%	22.0%	23.0%	24.0%	24.0%
	Operating Expenses Total		$ 24,570,000	$ 30,888,000	$ 40,675,500	$ 51,321,600	$ 62,052,480
	Selling and Distribution Expenses Cost per Unit		$ 15.60	$ 15.86	$ 16.11	$ 16.50	$ 16.76
	Selling and Distribution Expenses %		12.0%	12.2%	12.3%	12.5%	12.6%
	Selling and Distribution Expenses Total		$ 14,040,000	$ 17,128,800	$ 21,752,550	$ 26,730,000	$ 32,577,552
	Marketing Expenses Cost per Unit		$ 10.40	$ 9.10	$ 9.17	$ 7.92	$ 7.98
	Marketing Expenses %		8.0%	7.0%	7.0%	6.0%	6.0%
	Marketing Expenses Total		$ 9,360,000	$ 9,828,000	$ 12,379,500	$ 12,830,400	$ 15,513,120
	R&D Expenses Cost per Unit		$ 5.20	$ 5.20	$ 5.24	$ 5.28	$ 5.32
	R&D Expenses %		4.0%	4.0%	4.0%	4.0%	4.0%
	R&D Expenses Total		$ 4,680,000	$ 5,616,000	$ 7,074,000	$ 8,553,600	$ 10,342,080
	Salaries and Wages Expenses Cost per Unit		$ 21.50	$ 27.50	$ 28.00	$ 28.00	$ 28.00
	Salaries and Wages Expenses %		16.54%	16.34%	15.53%	15.62%	15.81%
	Salaries and Wages Expenses Total		$ 19,350,000	$ 22,939,200	$ 27,468,450	$ 33,404,400	$ 40,866,768
	Fully loaded Expenses %		100.00%	100.00%	100.00%	100.00%	100.00%
	Total Expenses: Tablet		$ 117,000,000	$ 140,400,000	$ 176,850,000	$ 213,840,000	$ 258,552,000
Peripherals	Production Units: Peripherials	SC2	409,500	483,300	553,500	615,600	738,720
	Total Fixed + Variable Expenses	SC5	$ 696,150.00	$ 821,610.00	$ 940,950.00	$ 1,046,520.00	$ 1,255,824.00
	Cost of Good Sales Per Unit: Peripherals	SC5	$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70
	Direct Expenses Cost per Unit		$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70
	Direct Expenses %		100%	100%	100%	100%	100%
	Direct Expenses Total		$ 696,150	$ 821,610	$ 940,950	$ 1,046,520	$ 1,255,824
	Selling and Distribution Cost per Unit
	Selling and Distribution Exp %
	Selling and Distribution Exp Total
	Fully loaded Cost : Peripherials		$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70
	Total Expenses: Peripherals		$ 696,150	$ 821,610.00	$ 940,950.00	$ 1,046,520.00	$ 1,255,824.00
Totals	Total Direct Expenses		$ 45,696,150	$ 54,821,610	$ 68,440,950	$ 82,046,520	$ 98,455,824
	Total Operating Expenses		$ 24,570,000	$ 30,888,000	$ 40,675,500	$ 51,321,600	$ 62,052,480
	Total Selling and Distribution Expenses		$ 14,040,000	$ 17,128,800	$ 21,752,550	$ 26,730,000	$ 32,577,552
	Total Marketing Expenses		$ 9,360,000	$ 9,828,000	$ 12,379,500	$ 12,830,400	$ 15,513,120
	Total R&D Expenses		$ 4,680,000	$ 5,616,000	$ 7,074,000	$ 8,553,600	$ 10,342,080
	Total Salaries and Wages		$ 19,350,000	$ 22,939,200	$ 27,468,450	$ 33,404,400	$ 40,866,768
	Total Expenses		$ 117,696,150	$ 141,221,610	$ 177,790,950	$ 214,886,520	$ 259,807,824
	CGS- Validation		$ 117,696,150	$ 141,221,610	$ 177,790,950	$ 214,886,520	$ 259,807,824

Taxes (SC7)

BUSN-460-13255: FINANCE TEAM: TAXES
Taxable Income ($)	Tax Rate[21]
0 to 50,000	15%		15%
75,000 to 100,000	$13,750 + 34% Of the amount over 75,000	$ 13,750	34%
100,000 to 335,000	$22,250 + 39% Of the amount over 100,000	22,250	39%
335,000 to 10,000,000	$113,900 + 34% Of the amount over 335,000	113,900	34%
10,000,000 to 15,000,000	$3,400,000 + 35% Of the amount over 10,000,000	3,400,000	35%
15,000,000 to 18,333,333	$5,150,000 + 38% Of the amount over 15,000,000	5,150,000	38%
18,333,333 and up	35%		35%
		Schedule		Year 1	Year 2	Year 3	Year 4	Year 5
(+) Net Sales		SC2		$ 151,247,372	$ 182,835,800	$ 230,033,075	$ 275,817,247	$ 330,980,697
(-) Total Cost of Sales		Proforma		$ 114,816,150	$ 137,405,610	$ 172,516,950	$ 208,132,920	$ 251,265,744
(-) R&D		SC6		$ 4,680,000	$ 5,616,000	$ 7,074,000	$ 8,553,600	$ 10,342,080
(=) EBIT				$ 31,751,222	$ 39,814,190	$ 50,442,125	$ 59,130,727	$ 69,372,873
Taxable Income ($)				18,333,333 and up	18,333,333 and up	18,333,333 and up	18,333,333 and up	18,333,333 and up
Tax Bracket
Tax %				35%	35%	35%	35%	35%
Tax Amount1				$ 11,112,928	$ 13,934,967	$ 17,654,744	$ 20,695,755	$ 24,280,505
Income Tax Expense				$ 11,112,928	$ 13,934,967	$ 17,654,744	$ 20,695,755	$ 24,280,505

ProForma

BUSN-460-13255: FINANCE TEAM: PRO-FORMA STATEMENTS
Pro forma Income Statement
		Schedule	Year 1	Year 2	Year 3	Year 4	Year 5
Revenue
	Gross Sales	SC2	$ 173,385,000	$ 207,819,000	$ 258,255,000	$ 308,448,000	$ 370,137,600
	(-) Sales Discounts	SC2	$ 22,055,850	$ 24,885,090	$ 28,099,440	$ 32,483,916	$ 38,980,699
	(-) Sales Returns	SC2	$ 81,779	$ 98,110	$ 122,486	$ 146,837	$ 176,204
	Net Sales		$ 151,247,372	$ 182,835,800	$ 230,033,075	$ 275,817,247	$ 330,980,697
(-) Cost of Sales
	(-)Variable overhead	SC5	$ 45,696,150	$ 54,821,610	$ 68,440,950	$ 82,046,520	$ 98,455,824
	(-) Marketing Expenses	SC6	$ 9,360,000	$ 9,828,000	$ 12,379,500	$ 12,830,400	$ 15,513,120
	(-) Selling and Admin	SC6	$ 14,040,000	$ 17,128,800	$ 21,752,550	$ 26,730,000	$ 32,577,552
	(-) Operating Expenses	SC6	$ 24,570,000	$ 30,888,000	$ 40,675,500	$ 51,321,600	$ 62,052,480
	(-) Salaries and Wages	SC6	$ 19,350,000	$ 22,939,200	$ 27,468,450	$ 33,404,400	$ 40,866,768
	(-) Depreciation	SC4	$ 1,800,000	$ 1,800,000	$ 1,800,000	$ 1,800,000	$ 1,800,000
	Total Cost Of Sales		$ 114,816,150	$ 137,405,610	$ 172,516,950	$ 208,132,920	$ 251,265,744
Gross Profit			$ 36,431,222	$ 45,430,190	$ 57,516,125	$ 67,684,327	$ 79,714,953
(-) R&D		SC6	$ 4,680,000	$ 5,616,000	$ 7,074,000	$ 8,553,600	$ 10,342,080
(=) EBIT			$ 31,751,222	$ 39,814,190	$ 50,442,125	$ 59,130,727	$ 69,372,873
(-) Income Tax expense		SC7	$ 11,112,928	$ 13,934,967	$ 17,654,744	$ 20,695,755	$ 24,280,505
(=) Net Income			$ 20,638,294	$ 25,879,224	$ 32,787,381	$ 38,434,973	$ 45,092,367
Pro Forma Projected Cash flows - Indirect view
	Schedule	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Investment	SC3	$ 22,259,746
(+) Sales	SC2		$ 151,247,372	$ 182,835,800	$ 230,033,075	$ 275,817,247	$ 330,980,697
(-) CGS	SC5		$ 117,696,150	$ 141,221,610	$ 177,790,950	$ 214,886,520	$ 259,807,824
(-) Tax Expense	SC7		$ 11,112,928	$ 13,934,967	$ 17,654,744	$ 20,695,755	$ 24,280,505
(=) Net Income			$ 22,438,294	$ 27,679,224	$ 34,587,381	$ 40,234,973	$ 46,892,367
(+) Depreciation	SC4		$ 1,800,000	$ 1,800,000	$ 1,800,000	$ 1,800,000	$ 1,800,000
(=) Net Cash Flow		$ (22,259,746)	$ 24,238,294	$ 29,479,224	$ 36,387,381	$ 42,034,973	$ 48,692,367

Investment

BUSN-460-13255: FINANCE TEAM: INVESTMENT ANALYSIS
1) Cashflow Analysis
The identified net cash flow from operations for AINO will be used as input to the financial methods (NVP, IRR) to evaluate its business strategy and potential success.
Projected Net Cashflows from Operations
Year	Investment	(+) Sales	(-) CGS	(-) Tax Expense	(=) NET Income	(+) Depreciation	(=) Net Cash Flows
0	$22,259,746						$ (22,259,746)
1		$ 151,247,372	$ 117,696,150	$ 11,112,928	$ 22,438,294	$ 1,800,000	$ 24,238,294
2		$ 182,835,800	$ 141,221,610	$ 13,934,967	$ 27,679,224	$ 1,800,000	$ 29,479,224
3		$ 230,033,075	$ 177,790,950	$ 17,654,744	$ 34,587,381	$ 1,800,000	$ 36,387,381
4		$ 275,817,247	$ 214,886,520	$ 20,695,755	$ 40,234,973	$ 1,800,000	$ 42,034,973
5		$ 330,980,697	$ 259,807,824	$ 24,280,505	$ 46,892,367	$ 1,800,000	$ 48,692,367
2) ARR
“The accounting rate of return (ARR) indicates the profitability of capital expenditures. “ (Shim, Jae K.) Based on this, projects or investments with higher rates of return are more attractive.
Accounting Rate of Return (ARR)
Initial Investment	Cash inflows	Depreciation	ARR
$ 22,259,746	$ 22,438,294	$ 1,800,000	93%
Appying the ARR formula to AINO business mode, we identified a 86% rate
3) NPV
The net present value (NPV) model uses management's minimum desired rate-of-return, to compute the present value of all net cash inflows. If the result is positive ( the project meets the minimim desired rate of retun), it is eligible for further considerations. If the result is negative, the project is rejected. Thus, higher positive NVP's are desired.
		IRR	35%
Year	Investment	Cash Flows	PV Cash Flows
0	-$22,259,746
1		$ 24,238,294	$ 17,954,292
2		$ 29,479,224	$ 16,175,157
3		$ 36,387,381	$ 14,789,364
4		$ 42,034,973	$ 12,655,395
5		$ 48,692,367	$ 10,859,055
PV Inflows			$ 72,433,263
Pv Outflows			$ (22,259,746)
Net Present Value			$ 50,173,517
4) Payback Period
The payback period identifies the amount of time it takes to recover the cost of the investment from the net cash flows produced by the business strategy. “This method can be particularly useful if a company has cash flow problems and needs to recover their investment in a relatively short period of time.” (Shim, Jae K.)
Payback Period
Investment		$22,259,746
Annual Cash Flows (avg)		$22,438,294
Payback Period		1.0
Rate of Return		100.80%
6) Profitability Index
As an additional measurement to ensure that the investment identified will be profitable, a profitability index was completed, using the information compiled as part of the NVP as input to obtain present value of cash inflows and outflows.
Profitability Index (PI)			The PI reflects an index of 2.99, which is greater than 1, validating that the investment will be profitable and should increase the value of the business.
PV Inflows	$ 72,433,263
PV Outflows	$ 22,259,746
PI	3.25

Payback Period = Initial Investment / Annual Cash Inflow Payback Period = 1.1

What IF

Forecast NEW

	BUSN-460-13255: FINANCE TEAM: FORECAST
			Schedule	Year 1	Year 2	Year 3	Year 4	Year 5
UNITS
	Tablet	Tablet Price	SC2	$ 179	$ 179	$ 179	$ 179	$ 179
		Market Growth %	SC2		20%	25%	20%	20%
		Projected units (Based on Expected Sales %)	SC2	900,000	1,080,000	1,350,000	1,620,000	1,944,000
		Units for Indirect Sales Distribution %	SC2	70%	65%	60%	60%	60%
		Units for Direct Sales Distribution %	SC2	30%	35%	40%	40%	40%
	Peripherals	Peripherals Price	SC2	$ 30.00	$ 30.00	$ 30.00	$ 30.00	$ 30.00
		Projected units (Based on Expected Sales %)	SC2	409,500	483,300	553,500	615,600	738,720
		Units for Indirect Sales Distribution	SC2	315,000	351,000	364,500	388,800	466,560
		Units for Direct Sales Distribution	SC2	94,500	132,300	189,000	226,800	272,160
(+) REVENUE
		GROSS SALES		$ 173,385,000	$ 207,819,000	$ 258,255,000	$ 308,448,000	$ 370,137,600
	Tablet	(+) Gross Sales	SC2	$ 161,100,000	$ 193,320,000	$ 241,650,000	$ 289,980,000	$ 347,976,000
		(-) Projected Discounts		$ 14,048,550	$ 15,962,670	$ 18,833,850	$ 22,600,620	$ 27,120,744
		(-) Projected Returns		$ 80,550	$ 96,660	$ 120,825	$ 144,990	$ 173,988
		Net Sales: Tablet		$ 146,970,900	$ 177,260,670	$ 222,695,325	$ 267,234,390	$ 320,681,268
	Peripherals	(+) Gross Sales	SC2	$ 12,285,000	$ 14,499,000	$ 16,605,000	$ 18,468,000	$ 22,161,600
		(-) Projected Discounts		$ 8,007,300	$ 8,922,420	$ 9,265,590	$ 9,883,296	$ 11,859,955
		(-) Projected Returns		$ 1,229	$ 1,450	$ 1,661	$ 1,847	$ 2,216
		Net Sales: Peripherals		$ 4,276,472	$ 5,575,130	$ 7,337,750	$ 8,582,857	$ 10,299,429
		NET SALES		$ 151,247,372	$ 182,835,800	$ 230,033,075	$ 275,817,247	$ 330,980,697
(-) Cost of Sale
	Tablet	Total Fixed Cost		$ 73,800,000	$ 88,200,000	$ 111,150,000	$ 134,640,000	$ 163,152,000
		(-) Total Operating Expenses		$ 24,570,000	$ 30,888,000	$ 40,675,500	$ 51,321,600	$ 62,052,480
		(-) Total Selling and Distribution Expenses		$ 14,040,000	$ 17,128,800	$ 21,752,550	$ 26,730,000	$ 32,577,552
		(-) Total Marketing Expenses		$ 9,360,000	$ 9,828,000	$ 12,379,500	$ 12,830,400	$ 15,513,120
		(-) Total R&D Expenses		$ 4,680,000	$ 5,616,000	$ 7,074,000	$ 8,553,600	$ 10,342,080
		(-) Total Salaries and Wages		$ 19,350,000	$ 22,939,200	$ 27,468,450	$ 33,404,400	$ 40,866,768
		(-) Depreciation		$ 1,800,000	$ 1,800,000	$ 1,800,000	$ 1,800,000	$ 1,800,000
		Fixed Cost per Unit		$ 80	$ 80	$ 81	$ 82	$ 83
		Total Variable Cost		$ 45,000,000	$ 54,000,000	$ 67,500,000	$ 81,000,000	$ 97,200,000
		Variable Cost		$ 50	$ 50	$ 50	$ 50	$ 50
		Cost of Good Sales per Unit		$ 130	$ 130	$ 131	$ 132	$ 133
		Cost of Good Sales: Tablet		$ 118,800,000	$ 142,200,000	$ 178,650,000	$ 215,640,000	$ 260,352,000
	Peripherals	Total Variable Cost		$ 696,150	$ 821,610	$ 940,950	$ 1,046,520	$ 1,255,824
		Variable Cost		$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70
		Cost of Good Sales per Unit		$ 1.70	$ 1.70	$ 1.70	$ 1.70	$ 1.70
		Cost of Good Sales: Peripherals		$ 696,150	$ 821,610	$ 940,950	$ 1,046,520	$ 1,255,824
		TOTAL COST OF SALES		$ 119,496,150	$ 143,021,610	$ 179,590,950	$ 216,686,520	$ 261,607,824
		PROFIT MARGIN (BEFORE TAXES)		$ 31,751,222	$ 39,814,190	$ 50,442,125	$ 59,130,727	$ 69,372,873
		Profit margin: Tablet		$ 28,170,900	$ 35,060,670	$ 44,045,325	$ 51,594,390	$ 60,329,268
		Profit margin per unit: Tablet		$ 49.00	$ 49.00	$ 48.00	$ 47.00	$ 46.00
		Profit margin: Peripherals		$ 3,580,322	$ 4,753,520	$ 6,396,800	$ 7,536,337	$ 9,043,605
		Profit margin per unit: Peripherals		$ 28.30	$ 28.30	$ 28.30	$ 28.30	$ 28.30
	Total Net Revenue			$ 31,751,221.50	$ 39,814,190.10	$ 50,442,124.50	$ 59,130,727.20	$ 69,372,872.64
	Estimated Tax			$ 11,112,927.52	$ 13,934,966.53	$ 17,654,743.58	$ 20,695,754.52	$ 24,280,505.42
	Net Profit			$ 20,638,294	$ 25,879,224	$ 32,787,381	$ 38,434,973	$ 45,092,367
				$ 17,243,805	$ 20,276,845	$ 23,445,626	$ 26,237,086	$ 29,321,121