Acme Manufacturing Corp.

Business Valuation

Acme Manufacturing Corp.

123 Anywhere

Suite 540

New York, NY, 10019

CONFIDENTAL 08/18/2017

Acme Manufacturing Corp. Financial Projections Page 1
Contents

Financial Forecasts ........................................................................................................................................ 3
Synopsis .................................................................................................................................................... 3
Assumptions.............................................................................................................................................. 3
Use of Funds.............................................................................................................................................. 4
Financial Highlights ................................................................................................................................... 5
Financial Indicators ................................................................................................................................... 6
Revenue Forecast...................................................................................................................................... 7
Projected Profit and Loss .......................................................................................................................... 8
Projected Cash Flow.................................................................................................................................. 9
Projected Balance Sheet ......................................................................................................................... 10
Sensitivity Analysis .................................................................................................................................. 11
Break-Even Analysis ................................................................................................................................ 12
Valuation Model ..................................................................................................................................... 13
Selected Comparable Companies ....................................................................................................... 13
Appendix ..................................................................................................................................................... 14
Year One – 12 Month P&L ...................................................................................................................... 14
Year Two – 12 Month P&L ...................................................................................................................... 15
Year Three – 12 Month P&L .................................................................................................................... 16
Year One – 12 Month Cash Flow............................................................................................................. 17
Year Two – 12 Month Cash Flow ............................................................................................................ 18
Year Three – 12 Month Cash Flow .......................................................................................................... 19
List of Abbreviations ............................................................................................................................... 20

Figure 1: Post-Financing Capital .................................................................................................................... 4
Figure 2: Financial Highlights ........................................................................................................................ 5
Figure 3: Financial Metrics ............................................................................................................................ 6
Figure 4: Revenue Forecast ........................................................................................................................... 7
Figure 5: Projected Five Year Cash Flow ....................................................................................................... 9
Figure 6: Projected Five Year Balance Sheet............................................................................................... 10
Figure 7: Revenue Sensitivity ...................................................................................................................... 11
Figure 8: Break-Even Analysis ..................................................................................................................... 12
Figure 9: DCF/COMPS Valuation ................................................................................................................. 13
Figure 10: EBITDA Margin ........................................................................................................................... 13
Figure 11: Year 1 - 12 Month P&L ............................................................................................................... 14
Figure 12: Year 2 - 12 Month P&L ............................................................................................................... 15
Figure 13: Year 3 - 12 Month P&L ............................................................................................................... 16

Acme Manufacturing Corp. Financial Projections Page 2
Financial Forecasts

Synopsis

The following financial projections and business valuation assume the forward looking performance of
Acme Manufacturing Co, a business that specializes in the production of milk and sale to distributors and
wholesale buyers in North America. The projections were based on an analysis of the company’s historical
financial performance including an analysis of its revenue streams and expense structure. All forward
looking statements are speculative based on the set of assumptions outlined within this document.

Overall, we believe that Acme Manufacturing Co. will continue to grow at a rate between 15 – 20% per
year after an additional investment of $1,500,000 from a private investor with a profit margin averaging
20%. The valuation within these projections was performed using a discounted cash flow analysis model
selecting the earnings multiples from three comparable manufacturers in the United States with assets
between $50 – 100 M and revenue less than $200 M.

Assumptions

1. The historical growth rate of the company has been between 25 – 35% per year, with the assumed
growth of the current product lines and the company’s expected expansion into the Southwest
market, we expect this to continue at perpetuity but have assumed a slight declined to reflect the
increasingly competitive market.

2. The financial performance assumes an investment of $1,500,000 for an equity stake to be
determined, the financials have not assumed any dividend distribution and assumes company re-
invests cash flows. Should the terms of the financing change to debt or dividend withdraws, the
financial projections and underlying assumptions will change.1

3. The financials assume the roll-out of the future strategy plans as proposed by management for
ongoing expansion into the North American market. The complete request prepared that outlines
this strategy, more detailed resource allocation, and a timeline for implementation is available
upon request.

1
The cost of capital has been provided by management based on their current discussions with private investors
who will not have a dividend withdraw and anticipate a five year holding period.

Acme Manufacturing Corp. Financial Projections Page 3
Use of Funds

A total of $1,500,000 is forecasted with an estimated $300,000 to acquire equipment and modify the
factory with an additional $250,000 for equipment and the remainder going into operating expenses and
raw inventory acquisition. 2 Startup costs are considered pre-revenue expenses that are incurred prior to
operations.

Startup Assets Startup Liabilities
Leasehold Improvements 50,000 Liabilities and Capital
Equipment 250,000 Current Borrowing -
Cash on Hand 805,560 Long-Term Liabilities -
Total Startup Assets $1,105,560 Accounts Payable -
Other Current Liabilities -
Startup Expenses
Professional Services 4,800 Startup Investments
Utilities & Telephone 2,400 Planned Investment
Office Expenses & Supplies 3,600 Owner -
Repair & Maintainence 7,200 Investor 1,500,000
Advertising 120,000 Total Planned Investment $1,500,000
Auto, Delivery, and Travel 7,200
Accounting and Legal 2,700
Startup Funding
Rent Expense 240,000 Total Liabilities -
Insurance 4,500 Total Planned Investment 1,500,000
Social Media 2,040 Total Funding $1,500,000
Total Startup Expenses $394,440
Total Requirements
Total Startup Expenses 394,440
Total Startup Assets 1,105,560
Total Requirements $1,500,000

Figure 1: Post-Financing Capital3

Capital Allocation

Cash on Hand

Equipment

Building Acquisition

Construction Costs

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000

2
Raw inventory acquisition consist of inventory for the increased assembly line including but not limited to
unprocessed dairy milk, plastic containers, and chemicals for homogenization.

Acme Manufacturing Corp. Financial Projections Page 4
Financial Highlights

The financial highlights provide an overview of the company’s projected performance in thousands over
a twelve month period and over the next five years. The company expects a negative cashflow for at least
the first quarter as it invests in new operations, sales & marketing channels to increase growth.

Financial Highlights ($000)
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 5 10 20 40 80 104 135 176 228 274 329 395 1796 3183 6367 9550 12734
Gross Margin 3 6 12 24 48 62 81 105 137 165 197 237 1078 1910 3820 5730 7640
Operating Expense 68 68 68 68 68 68 68 68 68 68 68 68 818 1039 2078 3117 4156
EBITDA (77) (74) (68) (56) (32) (17) 1 26 57 85 118 157 119 551 1417 2284 3150
Net Profit (80) (77) (71) (59) (35) (20) (2) 23 54 82 115 154 83 515 1382 2248 3114

Gross Margin/Revenue 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%
EBITDA/Revenue -1538% -739% -339% -140% -40% -17% 1% 15% 25% 31% 36% 40% 7% 17% 22% 24% 25%
Net Profit/Revenue -1597% -769% -354% -147% -44% -20% -1% 13% 24% 30% 35% 39% 5% 16% 22% 24% 24%

Net Cash Flow (77) (74) (68) (56) (32) (17) 1 26 57 85 118 157 119 551 1417 2284 3150
Cash Balance - Ending 729 655 587 531 499 482 483 508 566 650 768 925 925 1476 2893 5177 8326

Figure 2: Financial Highlights

Projected Operating Highlights By Year ($000) Projected Revenues By Year ($000)
14000 14000

12000 12000
Revenue
10000 10000

8000 Gross Margin 8000

6000 6000
EBITDA
4000 4000

2000 Net Profit 2000

0 0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5

Projected Cash Flow By Year ($000) Projected Net Income By Year ($000)
9000 3500
8000 3000
7000
Net Cash Flow 2500
6000
5000 2000
4000 1500
3000
Cash Balance 1000
2000
1000 500

0 0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5

Acme Manufacturing Corp. Financial Projections Page 5
Financial Indicators

The company expects a consistent gross margin given its manufacturing services with a consistent sale
and a net profit margin ranging to average between 20 – 25% once the company reverts back to its prior
margins after investing into the growth and expansion of its new product line and geographic expansion.

Financial Indicators
Year 1 Year 2 Year 3
Profitability %'s:
Gross Margin 60% 60% 60%
Net Profit Margin 5% 16% 22%
EBITDA to Revenue 7% 17% 22%
Return on Assets 5% 25% 40%
Return on Equity 5% 25% 40%

Figure 3: Financial Metrics

Financial Indicators
70%

60% Gross Margin

50%
Net Profit Margin
40%

30%
EBITDA to Revenue

20%

10% Return on Assets

0%
Year 1 Year 2 Year 3

Acme Manufacturing Corp. Financial Projections Page 6
Revenue Forecast

The revenue forecast provides a distribution of the projected unit sales and the associated price per unit.
The expectation is that the company will continue to invest in wholesale orders distributors to enable it
to focus on higher volumes of sales.
Revenue Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
Assumptions
Pallat 359,296.72 636,685.06 1,273,370.12 1,910,055.18 2,546,740.24
1 Gallon 898,241.79 1,591,712.65 3,183,425.30 4,775,137.96 6,366,850.61
1/2 Gallon 538,945.08 955,027.59 1,910,055.18 2,865,082.77 3,820,110.36

Revenue Forecast
Wholesale Milk Sales 1,796,484 3,183,425 6,366,851 9,550,276 12,733,701
Total Revenue $ 1,796,484 $ 3,183,425 $ 6,366,851 $ 9,550,276 $ 12,733,701

Direct Cost of Revenue
Wholesale Milk Sales 718,593 1,273,370 2,546,740 3,820,110 5,093,480
Subtotal Cost of Revenue $ 718,593 $ 1,273,370 $ 2,546,740 $ 3,820,110 $ 5,093,480

Figure 4: Revenue Forecast

Revenue by Product Contribution
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
-
Year 1 Year 2 Year 3 Year 4 Year 5

Pallat 1 Gallon 1/2 Gallon

Year 1 Revenue Monthly
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Acme Manufacturing Corp. Financial Projections Page 7
Projected Profit and Loss

The projected profit and loss includes both gross margin related expenses4. Other expenses will be
incurred regardless of the company’s financial position and include advertising and marketing related
expenses aggressively for the first three years for the product launch, along with rent expense that is
already being incurred from the company’s existing location, but will need to acquire a larger facility for
the additional production line.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 1,796,484 3,183,425 6,366,851 9,550,276 12,733,701
Subtotal Cost of Revenue 718,593 1,273,370 2,546,740 3,820,110 5,093,480
Total Cost of Revenue $ 718,593 $ 1,273,370 $ 2,546,740 $ 3,820,110 $ 5,093,480

Gross Margin $ 1,077,890 $ 1,910,055 $ 3,820,110 $ 5,730,166 $ 7,640,221
Gross Margin/Revenue 60% 60% 60% 60% 60%

Expenses
Professional Services 9,600 9,734 19,469 29,203 38,937
Utilities & Telephone 4,800 4,867 9,734 14,602 19,469
Office Expenses & Supplies 7,200 7,301 14,602 21,902 29,203
Repair & Maintainence 14,400 14,602 29,203 43,805 58,406
Advertising 240,000 445,680 891,359 1,337,039 1,782,718
Auto, Delivery, and Travel 14,400 14,602 29,203 43,805 58,406
Accounting and Legal 5,400 5,476 10,951 16,427 21,902
Rent Expense 480,000 486,718 973,436 1,460,154 1,946,872
Insurance 9,000 9,126 18,252 27,378 36,504
Social Media 4,080 4,137 8,274 12,411 16,548
Shipping 4,800 4,867 9,734 14,602 19,469
Misc. SG&A 24,000 31,834 63,669 95,503 127,337
Total Operating Expenses $ 817,680 $ 1,038,943 $ 2,077,886 $ 3,116,829 $ 4,155,772
Wages & Payroll 141,000 320,177 324,902 329,769 334,782
Depreciation, Amortization & Taxes 35,714 35,714 35,714 35,714 35,714
Net Income $ 83,496 $ 515,221 $ 1,381,608 $ 2,247,854 $ 3,113,953
Net Income/Revenue 5% 16% 22% 24% 24%

Revenue By Year
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Year 1 Year 2 Year 3 Year 4 Year 5

4
Gross margin expenses include unprocessed milk, additives for flavored milk, containers for shipping and product
storage, and estimated allocated utilities associated with production storage and operating the processing
machinery.

Acme Manufacturing Corp. Financial Projections Page 8
Projected Cash Flow

The projected cash flow reflects a short holding period of inventory and raw goods since most of the
products will be acquired, sold, and delivered to the business buyer within thirty days. Therefore, very
little inventory spoilage should take place and will occur on the retail side.5

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Beginning Cash Balance $ 805,560 $ 924,770 $ 1,489,455 $ 2,668,817 $ 4,445,018
Cash Inflows
Income from Sales $ 1,796,484 $ 3,233,670 $ 5,497,240 $ 7,696,136 $ -
Accounts Receivable $ - $ - $ - $ - $ -
Total Cash Inflows $ 1,796,484 $ 3,233,670 $ 5,497,240 $ 7,696,136 $ 9,235,363

Cash Outflows

Investing Activities
New Fixed Assets Purchases $ - $ - $ - $ - $ -
Inventory Addition to Bal.Sheet $ - $ - $ - $ - $ -
Cost of Sales $ 718,593 $ 1,293,468 $ 2,198,896 $ 3,078,454 $ 3,694,145

Operating Activities
Salaries and Wages $ 141,000 $ 320,177 $ 324,902 $ 329,769 $ 334,782
Fixed Business Expenses $ 817,680 $ 1,055,341 $ 1,794,080 $ 2,511,712 $ 3,014,054
Taxes $ - $ - $ - $ - $ -

Financing Activities
Loan Payments $ - $ - $ - $ - $ -
Line of Credit Interest $ - $ - $ - $ - $ -
Line of Credit Repayments $ - $ - $ - $ - $ -
Dividends Paid $ - $ - $ - $ - $ -

Total Cash Outflows $ 1,677,273.43 $ 2,668,986.08 $ 4,317,877.54 $ 5,919,934.58 $ 7,042,980.54
Cash Flow $ 119,210.15 $ 564,684.37 $ 1,179,362.22 $ 1,776,201.10 $ 2,192,382.26
Operating Cash Balance $ 924,770.15 $ 1,489,454.52 $ 2,668,816.74 $ 4,445,017.84 $ 6,637,400.10
Ending Cash Balance $ 924,770.15 $ 1,489,454.52 $ 2,668,816.74 $ 4,445,017.84 $ 6,637,400.10

Figure 5: Projected Five Year Cash Flow

Year 1 Cash
1,000,000

800,000

Net Cash Flows
600,000

400,000

200,000
Cash Balance

-
Month 3
Month 1

Month 2

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

(200,000)

5
The company requires a purchasing order to be secured before the transaction so that it may prepare its
inventory in advance – all business customers pay within thirty-days, most are collected within 14 weeks.

Acme Manufacturing Corp. Financial Projections Page 9
Projected Balance Sheet

The projected balance sheet is based upon the company’s additional fixed assets post-financing for the
new assembly line. After the acquisition of the new assets, the company has assumed that there will be
no dividend draw and it will be re-invested back into the company. The beginning cash balance has been
derived from the Cash on Hand on the post-financing summary such that it will be available to cover fixed
operating expenses prior to launch.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $ 924,770 $ 1,489,455 $ 2,668,817 $ 4,445,018 $ 6,637,400
Other Current Assets $ 394,440 $ 394,440 $ 394,440 $ 7,200 $ 7,200
Total Current Assets $ 1,319,210 $ 1,883,895 $ 3,063,257 $ 6,363,325 $ 9,036,825

Long-term Assets
Long-term Assets $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000
Accumulated Depreciation $ 35,714 $ 71,429 $ 107,143 $ 142,857 $ 178,571
Total Long-term Assets $ 264,286 $ 228,571 $ 192,857 $ 157,143 $ 121,429
Total Assets $ 1,583,495 $ 2,112,465 $ 3,256,113 $ 4,996,600 $ 7,153,268

Liabilities and Capital
Current Liabilities
Accounts Payable $ - $ - $ - $ - $ -
Current Borrowing $ - $ - $ - $ - $ -
Other Current Liabilities $ - $ - $ - $ - $ -
Subtotal Current Liabilities $ - $ - $ - $ - $ -

Long-term Liabilities $ - $ - $ - $ - $ -
Total Liabilities $ - $ - $ - $ - $ -

Common Stock $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,500,000
Retained Earnings $ 83,496 $ 612,466 $ 1,756,114 $ 3,496,601 $ 5,653,269
Total Capital $ 1,583,496 $ 2,112,466 $ 3,256,114 $ 4,996,601 $ 7,153,269
Total Liabilities and Capital $ 1,583,495 $ 2,112,465 $ 3,256,113 $ 4,996,600 $ 7,153,268

Figure 6: Projected Five Year Balance Sheet

Acme Manufacturing Corp. Financial Projections Page 10
Sensitivity Analysis

The sensitivity analysis assumes a standard deviation in revenue of 15% over a five year period to
demonstrate the company’s ability to perform under less than projected performance. Over the course
of the past three years, the company has had no more than a deviation of 12% revenue and therefore, it
is reasonable to assume that growth will either continue or remain stagnant.

Best Case Scenario (Revenue Increase by 15%)
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue $ 2,065,956 $ 3,718,721 $ 6,321,826 $ 8,850,556 $ 10,620,667
Cost of Goods Sold $ 826,382 $ 1,487,488 $ 2,528,730 $ 3,540,222 $ 4,248,267
Gross Margin $ 1,239,574 $ 2,231,233 $ 3,793,095 $ 5,310,334 $ 6,372,400
Gross Margin/Revenue 60% 60% 60% 60% 60%
Operating Expenses $ 817,680 $ 1,055,341 $ 1,794,080 $ 2,511,712 $ 3,014,054
EBIT $ 421,894 $ 1,175,892 $ 1,999,016 $ 2,798,622 $ 3,358,347
EBIT/Revenue 20% 32% 32% 32% 32%

Worst Case Scenario (Revenue Decrease by 15%)
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue $ 1,527,011 $ 2,748,620 $ 4,672,654 $ 6,541,715 $ 7,850,058
Cost of Goods Sold $ 610,804 $ 1,099,448 $ 1,869,062 $ 2,616,686 $ 3,140,023
Gross Margin $ 916,207 $ 1,649,172 $ 2,803,592 $ 3,925,029 $ 4,710,035
Gross Margin Revenue 60% 60% 60% 60% 60%
Operating Expenses $ 817,680 $ 1,055,341 $ 1,794,080 $ 2,511,712 $ 3,014,054
EBIT $ 98,527 $ 593,831 $ 1,009,513 $ 1,413,318 $ 1,695,981
EBIT/Revenue 6% 22% 22% 22% 22%

Figure 7: Revenue Sensitivity

Revenue
$12,000,000

$10,000,000 Best Case

$8,000,000

$6,000,000 Most Likely

$4,000,000

$2,000,000 Worst Case

$-
Year 1 Year 2 Year 3 Year 4 Year 5

Acme Manufacturing Corp. Financial Projections Page 11
Break-Even Analysis

The break-even analysis has been performed using the weighted average sale price and production price
to support the new assembly line. The fixed costs presented include all operating and overhead related
expenses specific to the new assembly line that are unavoidable for the company’s new line, the entity’s
existing operations has not been considered in this calculation.

UNITS NET FIXED VARIABLE COST TOTAL COST TOTAL
- $0 $958,680 $0 $958,680 -$958,680
100,000 $200,000 $958,680 $80,000 $1,038,680 -$838,680
200,000 $400,000 $958,680 $160,000 $1,118,680 -$718,680
300,000 $600,000 $958,680 $240,000 $1,198,680 -$598,680
400,000 $800,000 $958,680 $320,000 $1,278,680 -$478,680
500,000 $1,000,000 $958,680 $400,000 $1,358,680 -$358,680
600,000 $1,200,000 $958,680 $480,000 $1,438,680 -$238,680
700,000 $1,400,000 $958,680 $560,000 $1,518,680 -$118,680
800,000 $1,600,000 $958,680 $640,000 $1,598,680 $1,320
900,000 $1,800,000 $958,680 $720,000 $1,678,680 $121,320
1,000,000 $2,000,000 $958,680 $800,000 $1,758,680 $241,320
1,100,000 $2,200,000 $958,680 $880,000 $1,838,680 $361,320
1,200,000 $2,400,000 $958,680 $960,000 $1,918,680 $481,320
1,300,000 $2,600,000 $958,680 $1,040,000 $1,998,680 $601,320
1,400,000 $2,800,000 $958,680 $1,120,000 $2,078,680 $721,320
1,500,000 $3,000,000 $958,680 $1,200,000 $2,158,680 $841,320
1,600,000 $3,200,000 $958,680 $1,280,000 $2,238,680 $961,320
Figure 8: Break-Even Analysis

Breakeven Analysis
$3,500,000

$3,000,000
COST-VOLUME-PROFIT

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0
1000000

1100000

1200000

1300000

1400000

1500000

1600000
0

100000

200000

300000

400000

500000

600000

700000

800000

900000

NET UNITS

Acme Manufacturing Corp. Financial Projections Page 12
Valuation Model

A discounted cash flow model was used with comparables retrieved from companies that have a similar
capital structure and revenue volume. The valuation has been conducted based on the new business unit
from the additional assembly line as if the company were to spin-off the unit at the end of a five year
period.

Selected Comparable Companies

• Acme X was acquired by Acme Y for a total of $2.0 B with total earnings of $200 M before interest
and taxes, the acquire was a producer of fruit based beverages sold to wholesalers directly and
through distributors with $15 M in fixed assets and $500 M in revenue.

• Acme C was acquired by Acme D for a total of $500 M with total earnings of $50 M before interest
and taxes, the acquire was a producer of dairy milk sold to wholesalers directly and through
distributors with $5 M in fixed assets and $125 M in revenue.

• Acme F was acquired by Acme E for a total of $1.3 B with total earnings of $130 M before interest
and taxes, the acquire was a farmer and producer of dairy milk sold to wholesalers directly and
through distributors with $12 M in fixed assets and $110 M in revenue.

Public Comparables (COMPS) Company Valuation
Year 1 Year 2 Year 3 Year 4 Year 5
Financial Performance
Revenue 1,796,484 3,183,425 6,366,851 9,550,276 12,733,701
EBITDA 119,210 550,935 1,417,322 2,283,568 3,149,667
Internet Business & Services
Revenue Multiple 2.7 2.7 2.7 2.7 2.7
EBIT Multiple 13.3 13.3 13.3 13.3 13.3
Risk Discount Factor 95.0% 80.0% 10.0% 10.0% 10.0%
Company Valuation $ 79,394 $ 1,467,692 $ 16,990,862 $ 27,375,412 $ 37,758,211

Figure 9: DCF/COMPS Valuation

EBITDA Margin

########## 10% 20% 30% 40% 50% 60% 70%
10% $ 161,684 $ 323,367 $ 485,051 $ 646,734 $ 808,418 $ 970,101 $ 1,131,785
20% $ 143,719 $ 287,437 $ 431,156 $ 574,875 $ 718,593 $ 862,312 $ 1,006,031
30% $ 125,754 $ 251,508 $ 377,262 $ 503,015 $ 628,769 $ 754,523 $ 880,277
Risk Discount

40% $ 107,789 $ 215,578 $ 323,367 $ 431,156 $ 538,945 $ 646,734 $ 754,523
50% $ 89,824 $ 179,648 $ 269,473 $ 359,297 $ 449,121 $ 538,945 $ 628,769
60% $ 71,859 $ 143,719 $ 215,578 $ 287,437 $ 359,297 $ 431,156 $ 503,015
70% $ 53,895 $ 107,789 $ 161,684 $ 215,578 $ 269,473 $ 323,367 $ 377,262
80% $ 35,930 $ 71,859 $ 107,789 $ 143,719 $ 179,648 $ 215,578 $ 251,508
90% $ 17,965 $ 35,930 $ 53,895 $ 71,859 $ 89,824 $ 107,789 $ 125,754

Figure 10: EBITDA Margin

Acme Manufacturing Corp. Financial Projections Page 13
Appendix

Year One – 12 Month P&L

Year 1 Profit & Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Revenue 5,000 10,000 20,000 40,000 80,000 104,000 135,200 175,760 228,488 274,186 329,023 394,827
Subtotal Cost of Revenue 2,000 4,000 8,000 16,000 32,000 41,600 54,080 70,304 91,395 109,674 131,609 157,931
Total Cost of Revenue $ 2,000 $ 4,000 $ 8,000 $ 16,000 $ 32,000 $ 41,600 $ 54,080 $ 70,304 $ 91,395 $ 109,674 $ 131,609 $ 157,931

Gross Margin $ 3,000 $ 6,000 $ 12,000 $ 24,000 $ 48,000 $ 62,400 $ 81,120 $ 105,456 $ 137,093 $ 164,511 $ 197,414 $ 236,896
Gross Margin/Revenue 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%

Expenses
Professional Services 800 800 800 800 800 800 800 800 800 800 800 800
Utilities & Telephone 400 400 400 400 400 400 400 400 400 400 400 400
Office Expenses & Supplies 600 600 600 600 600 600 600 600 600 600 600 600
Repair & Maintainence 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Advertising 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Auto, Delivery, and Travel 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Accounting and Legal 450 450 450 450 450 450 450 450 450 450 450 450
Rent Expense 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Insurance 750 750 750 750 750 750 750 750 750 750 750 750
Social Media 340 340 340 340 340 340 340 340 340 340 340 340
Shipping 400 400 400 400 400 400 400 400 400 400 400 400
Misc. SG&A 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Total Operating Expenses $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140 $ 68,140

EBIT $ (65,140) $ (62,140) $ (56,140) $ (44,140) $ (20,140) $ (5,740) $ 12,980 $ 37,316 $ 68,953 $ 96,371 $ 129,274 $ 168,756
EBIT/Revenue -1303% -621% -281% -110% -25% -6% 10% 21% 30% 35% 39% 43%

Figure 11: Year 1 - 12 Month P&L

Acme Manufacturing Corp. Financial Projections Page 14
Year Two – 12 Month P&L

Year 2 Profit & Loss

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Revenue 200,000 210,000 220,500 231,525 243,101 255,256 268,019 281,420 295,491 310,266 325,779 342,068
Subtotal Cost of Revenue 80,000 84,000 88,200 92,610 97,241 102,103 107,208 112,568 118,196 124,106 130,312 136,827
Total Cost of Revenue $ 80,000 $ 84,000 $ 88,200 $ 92,610 $ 97,241 $ 102,103 $ 107,208 $ 112,568 $ 118,196 $ 124,106 $ 130,312 $ 136,827

Gross Margin $ 120,000 $ 126,000 $ 132,300 $ 138,915 $ 145,861 $ 153,154 $ 160,811 $ 168,852 $ 177,295 $ 186,159 $ 195,467 $ 205,241
Gross Margin/Revenue 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%

Expenses
Professional Services 811 811 811 811 811 811 811 811 811 811 811 811
Utilities & Telephone 406 406 406 406 406 406 406 406 406 406 406 406
Office Expenses & Supplies 608 608 608 608 608 608 608 608 608 608 608 608
Repair & Maintainence 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217
Advertising 37,140 37,140 37,140 37,140 37,140 37,140 37,140 37,140 37,140 37,140 37,140 37,140
Auto, Delivery, and Travel 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217
Accounting and Legal 456 456 456 456 456 456 456 456 456 456 456 456
Rent Expense 40,560 40,560 40,560 40,560 40,560 40,560 40,560 40,560 40,560 40,560 40,560 40,560
Insurance 760 760 760 760 760 760 760 760 760 760 760 760
Social Media 345 345 345 345 345 345 345 345 345 345 345 345
Shipping 406 406 406 406 406 406 406 406 406 406 406 406
Misc. SG&A 2,653 2,653 2,653 2,653 2,653 2,653 2,653 2,653 2,653 2,653 2,653 2,653
Total Operating Expenses $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579 $ 86,579

EBIT $ 33,421 $ 39,421 $ 45,721 $ 52,336 $ 59,282 $ 66,575 $ 74,233 $ 82,273 $ 90,716 $ 99,581 $ 108,889 $ 118,662
Figure 12: Year 2 - 12 Month P&L
EBIT/Revenue 17% 19% 21% 23% 24% 26% 28% 29% 31% 32% 33% 35%

Acme Manufacturing Corp. Financial Projections Page 15
Year Three – 12 Month P&L

Year 3 Profit & Loss

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Revenue 400,000 420,000 441,000 463,050 486,203 510,513 536,038 562,840 590,982 620,531 651,558 684,136
Subtotal Cost of Revenue 160,000 168,000 176,400 185,220 194,481 204,205 214,415 225,136 236,393 248,213 260,623 273,654
Total Cost of Revenue $ 160,000 $ 168,000 $ 176,400 $ 185,220 $ 194,481 $ 204,205 $ 214,415 $ 225,136 $ 236,393 $ 248,213 $ 260,623 $ 273,654

Gross Margin $ 240,000 $ 252,000 $ 264,600 $ 277,830 $ 291,722 $ 306,308 $ 321,623 $ 337,704 $ 354,589 $ 372,319 $ 390,935 $ 410,481
Gross Margin/Revenue 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%

Expenses
Professional Services 1,622 1,622 1,622 1,622 1,622 1,622 1,622 1,622 1,622 1,622 1,622 1,622
Utilities & Telephone 811 811 811 811 811 811 811 811 811 811 811 811
Office Expenses & Supplies 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217 1,217
Repair & Maintainence 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434
Advertising 74,280 74,280 74,280 74,280 74,280 74,280 74,280 74,280 74,280 74,280 74,280 74,280
Auto, Delivery, and Travel 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434 2,434
Accounting and Legal 913 913 913 913 913 913 913 913 913 913 913 913
Rent Expense 81,120 81,120 81,120 81,120 81,120 81,120 81,120 81,120 81,120 81,120 81,120 81,120
Insurance 1,521 1,521 1,521 1,521 1,521 1,521 1,521 1,521 1,521 1,521 1,521 1,521
Social Media 690 690 690 690 690 690 690 690 690 690 690 690
Shipping 811 811 811 811 811 811 811 811 811 811 811 811
Misc. SG&A 5,306 5,306 5,306 5,306 5,306 5,306 5,306 5,306 5,306 5,306 5,306 5,306
Total Operating Expenses $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157 $ 173,157

EBIT $ 66,843 $ 78,843 $ 91,443 $ 104,673 $ 118,564 $ 133,150 $ 148,466 $ 164,547 $ 181,432 $ 199,162 $ 217,778 $ 237,324
EBIT/Revenue 17% 19% 21% 23% 24% 26% 28% 29% 31% 32% 33% 35%

Figure 13: Year 3 - 12 Month P&L

Acme Manufacturing Corp. Financial Projections Page 16
Year One – 12 Month Cash Flow

Year 1 Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cash Received

Revenue
$ 5,000.0 $ 10,000.0 $ 20,000.0 $ 40,000.0 $ 80,000.0 $ 104,000.0 $ 135,200.0 $ 175,760.0 $ 228,488.0 $ 274,185.6 $ 329,022.7 $ 394,827.3
New Current Borrowing
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Long-Term Liabilities
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Sale of Other Current Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Investment Received
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Subtotal Cash Received
$ 5,000.0 $ 10,000.0 $ 20,000.0 $ 40,000.0 $ 80,000.0 $ 104,000.0 $ 135,200.0 $ 175,760.0 $ 228,488.0 $ 274,185.6 $ 329,022.7 $ 394,827.3

Expenditures

Expenditures from Operations
$ 81,890.0 $ 83,890.0 $ 87,890.0 $ 95,890.0 $ 111,890.0 $ 121,490.0 $ 133,970.0 $ 150,194.0 $ 171,285.2 $ 189,564.2 $ 211,499.1 $ 237,820.9
Subtotal Spent on Operations
$ 81,890.0 $ 83,890.0 $ 87,890.0 $ 95,890.0 $ 111,890.0 $ 121,490.0 $ 133,970.0 $ 150,194.0 $ 171,285.2 $ 189,564.2 $ 211,499.1 $ 237,820.9

Additional Cash Spent

Current Borrowing Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
L-T Liabilities Principal Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Inventory
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cash Spent
$ 81,890.0 $ 83,890.0 $ 87,890.0 $ 95,890.0 $ 111,890.0 $ 121,490.0 $ 133,970.0 $ 150,194.0 $ 171,285.2 $ 189,564.2 $ 211,499.1 $ 237,820.9

Net Cash Flow
$ (76,890.0) $ (73,890.0) $ (67,890.0) $ (55,890.0) $ (31,890.0) $ (17,490.0) $ 1,230.0 $ 25,566.0 $ 57,202.8 $ 84,621.4 $ 117,523.6 $ 157,006.4
Cash Balance
$ 728,670.0 $ 654,780.0 $ 586,890.0 $ 531,000.0 $ 499,110.0 $ 481,620.0 $ 482,850.0 $ 508,416.0 $ 565,618.8 $ 650,240.2 $ 767,763.8 $ 924,770.2

Acme Manufacturing Corp. Financial Projections Page 17
Year Two – 12 Month Cash Flow

Year 2 Cash Flow

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cash Received

Revenue
$ 200,000.0 $ 210,000.0 $ 220,500.0 $ 231,525.0 $ 243,101.3 $ 255,256.3 $ 268,019.1 $ 281,420.1 $ 295,491.1 $ 310,265.6 $ 325,778.9 $ 342,067.9
New Current Borrowing
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Long-Term Liabilities
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Other Current Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Investment Received
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Subtotal Cash Received
$ 200,000.0 $ 210,000.0 $ 220,500.0 $ 231,525.0 $ 243,101.3 $ 255,256.3 $ 268,019.1 $ 281,420.1 $ 295,491.1 $ 310,265.6 $ 325,778.9 $ 342,067.9

Expenditures

Expenditures from Operations
$ 193,260.0 $ 197,260.0 $ 201,460.0 $ 205,870.0 $ 210,500.5 $ 215,362.5 $ 220,467.6 $ 225,828.0 $ 231,456.4 $ 237,366.2 $ 243,571.6 $ 250,087.1
Subtotal Spent on Operations
$ 193,260.0 $ 197,260.0 $ 201,460.0 $ 205,870.0 $ 210,500.5 $ 215,362.5 $ 220,467.6 $ 225,828.0 $ 231,456.4 $ 237,366.2 $ 243,571.6 $ 250,087.1

Additional Cash Spent

Current Borrowing Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
L-T Liabilities Principal Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Inventory
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cash Spent
$ 193,260.0 $ 197,260.0 $ 201,460.0 $ 205,870.0 $ 210,500.5 $ 215,362.5 $ 220,467.6 $ 225,828.0 $ 231,456.4 $ 237,366.2 $ 243,571.6 $ 250,087.1

Net Cash Flow
$ 6,740.0 $ 12,740.0 $ 19,040.0 $ 25,655.0 $ 32,600.8 $ 39,893.8 $ 47,551.5 $ 55,592.1 $ 64,034.7 $ 72,899.4 $ 82,207.4 $ 91,980.7
Cash Balance
$ 931,510.2 $ 944,250.2 $ 963,290.2 $ 988,945.2 ########## $ 1,061,439.7 $ 1,108,991.2 $ 1,164,583.3 $ 1,228,617.9 $ 1,301,517.3 $ 1,383,724.7 $ 1,475,705.4

Acme Manufacturing Corp. Financial Projections Page 18
Year Three – 12 Month Cash Flow

Year 3 Cash Flow

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cash Received

Revenue
$ 400,000.0 $ 420,000.0 $ 441,000.0 $ 463,050.0 $ 486,202.5 $ 510,512.6 $ 536,038.3 $ 562,840.2 $ 590,982.2 $ 620,531.3 $ 651,557.9 $ 684,135.7
New Current Borrowing
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Long-Term Liabilities
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Other Current Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Investment Received
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Subtotal Cash Received
$ 400,000.0 $ 420,000.0 $ 441,000.0 $ 463,050.0 $ 486,202.5 $ 510,512.6 $ 536,038.3 $ 562,840.2 $ 590,982.2 $ 620,531.3 $ 651,557.9 $ 684,135.7

Expenditures

Expenditures from Operations
$ 360,232.3 $ 368,232.3 $ 376,632.3 $ 385,452.3 $ 394,713.3 $ 404,437.4 $ 414,647.6 $ 425,368.4 $ 436,625.2 $ 448,444.8 $ 460,855.5 $ 473,886.6
Subtotal Spent on Operations
$ 360,232.3 $ 368,232.3 $ 376,632.3 $ 385,452.3 $ 394,713.3 $ 404,437.4 $ 414,647.6 $ 425,368.4 $ 436,625.2 $ 448,444.8 $ 460,855.5 $ 473,886.6

Additional Cash Spent

Current Borrowing Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
L-T Liabilities Principal Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Inventory
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cash Spent
$ 360,232.3 $ 368,232.3 $ 376,632.3 $ 385,452.3 $ 394,713.3 $ 404,437.4 $ 414,647.6 $ 425,368.4 $ 436,625.2 $ 448,444.8 $ 460,855.5 $ 473,886.6

Net Cash Flow
$ 39,767.7 $ 51,767.7 $ 64,367.7 $ 77,597.7 $ 91,489.2 $ 106,075.2 $ 121,390.6 $ 137,471.8 $ 154,357.0 $ 172,086.4 $ 190,702.4 $ 210,249.1
Cash Balance
$ 1,515,473.1 $ 1,567,240.8 $ 1,631,608.5 $ 1,709,206.1 $ 1,800,695.3 $ 1,906,770.6 $ 2,028,161.2 $ 2,165,633.0 $ 2,319,989.9 $ 2,492,076.4 $ 2,682,778.8 $ 2,893,027.9

Acme Manufacturing Corp. Financial Projections Page 19
List of Abbreviations

Asset Sale – a type of small business sale transaction in which all
underlying business assets transfer from the seller to the buyer.
The buyer assumes no business liabilities.

Average – the arithmetic mean value, calculated by adding all the
values in a set and dividing the sum by their number. For the
business selling price, the average is the sum of all the deal prices
divided by the number of the recorded business sales.

Days on Market – the time in days from the date the business is
listed for sale until the transaction closes.

Earnout – a portion of the business purchase price that is made
contingent upon the business achieving some future measure of
economic performance. For example, the earnout can be structured
as a percentage of sales in excess of some base number, paid over
some future period of time and limited to a maximum.

EBITDA – earnings before interest, tax, depreciation and
amortization.

EBIT – earnings before interest and tax expense.

EBT – earnings before tax expense.

FF&E – the portion of business operating asset base comprising its
furniture, fixtures and equipment.

Acme Manufacturing Corp. Financial Projections Page 20
Max – the maximum value in a set of values. For the business
selling price, this is typically the highest recorded selling price
value.

Median – the mid-range value with half of the values in the set
falling below it and another half being above it. For the business
selling price, the median price means that 50% of the business
sales were done at prices below the median, and the remaining
50% of the sales had prices above the median.

Min – the minimum value in a set of values. For the business
selling price, this is typically the lowest recorded selling price
value.

N/A – not available

Pricing Multiple – a statistically derived ratio of the business

selling price to a measure of the business economic performance

such as the business revenue, profit or cash flow.

Purchase Price – the total monetary consideration paid for the

business equity. Includes intangibles such as non-compete

agreements, excludes real estate, long-term liabilities assumed,

and earnouts.

Purchase Price ÷ Net Sales – a pricing multiple which equals the

purchase price divided by the business net sales.

Purchase Price ÷ EBT – a pricing multiple which equals the

purchase price divided by the business earnings before tax.

Acme Manufacturing Corp. Financial Projections Page 21
Purchase Price ÷ Net Income – a pricing multiple which equals

the purchase price divided by the business net income.

SDCF – seller’s discretionary cash flow is the business net pre-tax

income before a single owner’s total compensation, plus

amortization, depreciation, interest expense and adjusted for any

extraordinary, non-recurring or non-business related income or

expenses.

Selling Price – the monetary consideration paid for 100% of

business ownership interest in an asset sale transaction. The

Selling Price includes all business assets except cash, accounts

receivable and inventory. Accounts payable are also excluded. The

Selling Price does not include any long-term liabilities assumed by

the buyer.

Selling Price ÷ Gross Revenue – a pricing multiple which equals

the business selling price divided by the gross annual sales.

Selling Price ÷ SDCF – a pricing multiple which equals the

business selling price divided by the SDCF.

SIC – Standard Industrial Classification, a US classification system

grouping like businesses under the same numerical code.

Total Invested Capital – the purchase price plus all long-term

business liabilities that are assumed by the buyer.

Total Invested Capital ÷ EBIT – a pricing multiple which equals

the total invested capital divided by the business earnings before

interest and taxes.

Acme Manufacturing Corp. Financial Projections Page 22
Total Invested Capital ÷ Gross Profit – a pricing multiple which

equals the total invested capital divided by the firm’s gross profit.

Total Invested Capital ÷ Net Sales – a pricing multiple which

equals the total invested capital divided by the business net sales.

Acme Manufacturing Corp. Financial Projections Page 23