Question

Fast Feet is a new specialty running shoe store in Lumberton, NC. Fast Feet started off with a very good first year, as it made a profit. 2022 is not looking as good, however, as increased supply prices and utilities have driven up the COGS and a decrease in store traffic has sales numbers down considerably from 2021. Fast Feet does not have much of a seasonal swing, and with the store being new, there is no long-term

Answer 1

Due to the lack of a significant seasonal swing at Fast Feet and the lack of long-term data, forecasting is not possible. However, through May 31, 2022, sales will average $142,867.08 every month. The COGS at that time was $171,212.42.

Fast Feet must obviously change its strategy for the remainder of the year. You have been hired to conduct an examination of what Fast Feet should accomplish for a fee of $10,000 (administrative fees). The owner has requested the following possibilities be provided:

1. If nothing changes from the figures stated in the second paragraph, project the income statement, balance sheet, and statement of cash flows for 2022.

2. If Fast Feet launches a marketing campaign that is expected to boost sales from the first five-month average for 2022 by 21%, project the income statement, balance sheet, and statement of cash flows for 2022. Fast Feet will spend $3,000 on the campaign throughout the course of the final seven months of the year.

3. If Fast Feet decides to take on a new product line that is now very popular among runners, project the income statement, balance sheet, and statement of cash flows for 2022. Fast Feet will spend $164,000 on new inventory for the product in 2022, but it is anticipated to generate 262,400.000 in additional revenue for the remainder of the year. Fast Feet must select one of the following alternatives in order to pay for this new inventory:

• Financing for 36 months at a rate of 19.25 percent interest compounded monthly through Advent Athletics, the company that makes the new shoe line. Beginning on August 1, 2022, repayment would begin and last until July 31, 2025.

• Financial support from a private investor who requests a 20 percent stake in the business in exchange for a $25,000 yearly advising fee (administrative) due on December 31 of each year.

• Obtain financing from a bank that is providing 60 months of compounded monthly interest at a rate of 22 percent, with a reduction to 17 percent during the last 36 months if the first 24 months are paid on time (assume this will be done).

• You must calculate the expenditures associated with each of these choices and include them in your predicted financial statements for #3. Please record all calculations separately in your workbook on different papers.

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