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    Creating Income Statement Projections

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    All historical information remains the same (through Year X-1).

    Use this new set of assumptions:

    Revenue growth:
    30% Year X

    30% Year X + 1

    1% improvement in Gross Margin for Year X E (from year X-1). No further change in the Gross Margin for Year X+1.
    1% improvement in Selling in Year X E. Same level in Year X+1 E.
    G&A remains constant on a common size basis.
    $10,000 increase in R&D in X E.
    Same R&D level in Year X+1 E.
    Basic Shares outstanding - 3,000,000.
    A new section of the existing plant is constructed for $300,000. This new construction is depreciated over 30 years using the straight line method. All other depreciation remains the same for the years X E and X+1 E.
    The plant is financed with a $300,000 10 year bond with a fixed interest payment of 10% annually.
    The Company, for the first time, grants 500,000 options to various members of management with an exercise price of $1.00. These options are granted on the first day of Year X E.
    There are no other options, warrants or convertible securities.
    The average stock price for Year X E and Year X+1 E is projected to be $5.00.
    All other interest payments, interest income and tax rates remain the same.

    I have attached an Excel file for the solution.

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    Solution Summary

    This solution shows how to create projections in an income statement using MS Excel.