Science Technology Company
Financial Projections, 1985 – 1989

Criticisms

1. No benchmark.

2. The markets to be exploited are not specified.

3. The 30% annual growth rate projection is unrealistic. First, the average growth per year of STC, as shown by the table below, is only 12% — a far cry from the 30% annual growth rate projection. Second, the division managers or STC did not provide which product lines will produce the estimated increase.

Growth Percentage (per year)

|Year |Percentage |
|1980 - 1981 |7% |
|1981 – 1982 |11% |
|1982 – 1983 |20% |
|1983 – 1984 |10% |
|Average growth = 12% |

4. The estimated net profit from $23 million to $61 million is unfeasible. First, the increase between $23 million to $61 million is 182% — that’s too much of a stretch. Second, STC or its divisional managers did not point out how the rise in net profits from 1985 to 1989 will be achieved. Third, the company did not state which of its product lines can produce and sustain the estimated increase in net profits.

5. STC’s estimated P/E Ratios are doubtful because they were not compared with the P/E