You are working as a financial advisor for Mr. Petersen, who is a well-known investor. Today Mr. Petersen has explained to you a new business project that he has, and he wants you to prepare projected financial statements to have an idea of the profitability of the project.

Following we have the data that Mr. Petersen has delivered to you:

Sales: The expected sales are 2.000.000 units, for the first year, the sales will grow at a 20% year over year until year 5.

The sales price per unit is 2.8€ per unit.

Direct materials: The recipe of the product explains that direct material will have a cost of 1.5€ per unit.

Production labor: The first year the plant needs 3 technicians with a cost of 32500€ per person per year, 30 production workers with an annual cost of 28.000€ per employee per year, and 1 manager with a cost of 90.000€ per person per year. The next years the production labor will increase, due to the fact that the production of the plant will also be increasing. The year 2 the cost will be 7.25% higher than year 1, the year 3 the cost will be 16% higher than year 1, the year 4 the cost will be 22% higher than year 1 and in year 5 the cost will be 30% higher than year 1.

Investment: the required investment is 7.500.000€, of which 5.000.000 will be depreciated over a period of 10 years and the rest will be depreciated over a period of 4 years. No more investments will be required during the years 2 until 5.

Utilities expense: We expect a cost of 0.18€ per unit on the first year, and the energy cost will have a growth per unit of 7% year over year.

Quality control: the control will be outsourced, and we expect a cost of 3% of our sales per year.

General and administration costs are expected to be 200.000€ for the first year. For the following years the cost should increase a 5% year over year.

The days to collect accounts receivable are 60, the days to pay suppliers are also 60.

The company will need an inventory of 30 days.

Mr. Petersen is ready to invest 4.000.000€. The investments need to be paid upfront and the rest of money needed will come from a bank credit line, you should make your own estimation of the amount needed. The loan will be returned in 5 years starting at the end of year 2, so finishing at the end of year 7.

The tax rate is 25% and the interest rate is 4.5%.

Mr. Petersen is requesting from you a proposal of Profit & loss account for the next 5 years and a balance sheet for the same period.

(Hint start preparing the detailed cash planning for the first 12 months)

(50 points)

Mr Petersen is also requesting from you a detailed cash planning for the first 12 months, considering that the monthly sales will be distributed 5% for the months of January to April, 8% for May and June,11% July to October, 10% for November and the remaining sales in December.

Mr Petersen wants to have a minimum cash of 50.000€. (50 points)

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