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    Uncle Sal - Proforma Income Statement

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    Uncle Sal, our intrepid accountant, has recommended the purchase of a small business to his mother, Granny. The small business has the following sales projections:
    Year Sales in Thousands
    1 100
    2 150
    3 250
    4 500
    5 1000

    Variable costs are as follows:
    COGS 35% of sales figure
    Selling Expenses 10% of sales
    Taxes 35% of net Income

    Fixed Expenses include:

    Accountant $10,000 per year
    Guido's Fee $12,000 per year
    Rent $15,000 per year
    Interest $6,000 per year
    Depreciation $3,500 per year

    Semi-fixed costs include:

    Labor $5000 plus 10% of sales

    4a. Create a pro-forma income statement based on this information for the five year timeframe.

    4b. Should Granny take Sal's advise for this opportunity?

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    Granny should take exploit this opportunity as advised by Uncle Sal. The main ...

    Solution Summary

    The solution prepares pro-forma income statement based on given information for the five year timeframe.