An entrepreneur is going to open a new venture. He estimates that he needs cash in hand of $50,000, inventory of $50,000 and fixed assets of $500,000. His suppliers allow him to pay 50% of the inventory late. He can borrow 200,000 from a bank with an annual rate of 10%. Please help the entrepreneur to figure out the amount of equity that he needs and construct his start-up balance sheet .
The entrepreneur also estimates that on average he can sell 10,000 products each year. The product is priced at $200. The cost of goods sold per unit is $100. His estimated operating cost is $500,000 in the first year (not including depreciation) Depreciation is 10 % of total gross fixed assets. Income tax is 30%. Please help the entrepreneur to prepare a pro forma income statement for the first year.
Use the above information to calculate the break even point, return on equity and return on assets