 # FMA III 4,5,7: Explain the Parts of the Business Plan.

| January 25, 2014

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4 . Explain the parts of the business plan. Your response should be at least 250 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. 5. Construct a pro forma income statement for the first year and second year for the following assumptions: • Units of Sales in Year 1: 100,000 • Price per Unit: \$10 • Variable cost per unit: 30% • Fixed Costs: \$120,000 • Income taxes: 15% • Interest Expense: \$200,000 • In year 2, Price per unit increases to \$11.50, and unit of sales increases by 3%, all other assumptions remain the same. 7. Calculate a table of interest rates based on the following information: • The pure interest rate is 1.6% • Inflation expectations for year 1 = 3%, year 2 =3.5%, years 3-5 =5% • The default risk is .1% for year one and increases by .2% over each year • Liquidity premium is 0 for year 1 and increases by .2% each year • Maturity risk premium is 0 for years 1 and 2 and .2% for years 3-5
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