Simple balance sheet statement, Financial Accounting

Current analysis

You will need about $150,000 in start-up costs but you can only borrow half of that amount from your family's home equity (at 13% interest). You will have to borrow the rest of the needed capital from a local community bank at 10%. Suppose you decide to take out a 5 year loan. Here is the amortization schedule:

Date

Interest

Principal

Balance

Year 1

$13,904.46

$24,340.22

$125,659.78

Year 2

$11,355.72

$26,888.96

$98,770.83

Year 3

$8,540.10

$29,704.58

$69,066.24

Year 4

$5,429.64

$32,815.04

$36,251.20

Year 5

$1,993.48

$36,251.20

$0.00

 

Your estimated revenue per page of a medical record is 75 cents. The estimated processing cost per page is 20 cents

Marketing is expected to cost you $2,000 per year. So far, you only have two clients (two local hospitals) with combined annual discharges of 30,000. From your marketing efforts and word- of-mouth, you expect to gain 5,000 new discharges  each year over the next 5 years.

On average, you expect to release10 pages per discharge. You plan to pay yourself $85, 000 per year. You plan to hire a part-time clerk for every 15,000 discharges at $20,000 per year. You expect to pay $10,000 per year in equipment lease. For the next 5 years, your revenue and expenses  are expected to  increase by 3%, except the marketing costs (in other words, marketing will remain at $2,000 per year) Your tax rate is expected to stay at  35%

Questions 

1. What is your corporate cost of capital (CCC) on the day you start your business?

2. Construct a projected P&L statement in each year for next 5 years.

3. Construct a simple balance sheet statement in each year for next 5 years. Remember that Assets = Equity + Liabilities

4. Discuss about the Dupont equation of your company.

5.  What other financial measures can investors use to evaluate the profitability of your company?

Posted Date: 2/19/2013 8:17:06 AM | Location : United States







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