The Comfy is a product dreamed by the Speciale brothers. Michael and Brian. The Speciale Brothers hit the jackpot on Shark Tank and agreed to sell a 30% stake in their business for 550,000 on Dec 31, 2020. The first year went amazing! The company went from just a few protypes they made to over $15 million in sales. The company’s first year results are given below. Note, like the real world. there is more information than you actually need to do this assignment. You need to figure out what to use.
They have a negotiated contract with a manufacturer in Bangladesh for the following orders:
Production Costs Monthly Production Bill with under 20.000 order $13/Comfy Monthly Production Bill with under 20,001-99.999 order $12/Comfy Monthly Production Bill with 100.000+ order $11/Comfy
Shipping costs are $4 per Comfy (either to the customer directly or to the store/QVC).
Additionally, the brothers have rolled out an advertising platform and website: thecomfy.com s. Customer acquisition costs (the cost of accepting credit cards and advertising on Facebook) are approximately $6 per comfy and occur the same month as the sale, regardless of the venue sold.
Creating a Comfy Proforma
Using the percentage of sales approach and the company’s expectations of sales in the chart below, create a proforma income statement and balance sheet. Determine any additional funding needed in order to sustain the projected growth rate. The Shark wants her 30% of profits in the form of a cash dividend paid out. The Speciale brothers have promised to re-invest their money into the business for the first three years.
Product Sale Forecast Online Home Shopping Network Bed Bath and Beyond YR 1 75.000 300,000 200.000 YR 2 100,000 400.000 250.000 YR 3 150,000 600,000 375,000 Current Assets, Long-term assets. and account payable are 25%, 50%, and 20% of sales, respectively. Long-term debt and equity are not fixed in relation to sales.
Project Instructions
• template 1
• Using the template and the information below, create a pro forma for The Comfy. • Name your file: Comfy_YourName.xls
Word Document
• Create a Word Document explaining your expectations for additional funding to the Shark. • Name your file: Comfy_YourName.docx • In your memo, either explain how the cash coming in is going to be sufficient to fund growth OR outline how much additional cash will be needed. • You will most likely need to make up a few small charts to make your plan clear and readable. • Address what you believe should be done with any excess cash (for example: pay it out to the Speciale Brothers, keep it for a rainy day in cash, etc.) OR if you think the company should issue debt, equity, or a combination of both to fund the shortfall. • Note: Points will be given not based on your choice but rather your justification of which you choose.
template 1:
Income Statement
Year 1Year 2Year 3
Revenues $16,330,000
Manufacturing Costs $6,132,000
Shipping Costs $2,044,000
Customer Acquisition Costs $3,066,000
EBT $5,088,000
Taxes (21%) $1,068,480
Net Income $4,019,520
Balance Sheet
Year 1Year 2Year 3
Assets
Current Assets 4,082,500
Long-Term Assets 8,165,000
Total Assets 12,247,500
Liabilities
Accounts Payable $3,266,000
Long-Term Debt $6,067,836
Common Stock $100,000
Accumulated Retained Earnings $2,813,664
Total Liabilities and Equity $12,247,500
