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Interact Systems

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Submitted By whitelilyx33
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Chapter 2 Mini Case: LearnRite.com Corporation

A. Project industry sales for children’s software through 2013.
Industry Sales: Children’s Software only
Gross Profit Margin: 30% per year Y | Sales (in millions) | 2009 | 1,000 | 2010 | 1,000(.30)+1,000=1,300 | 2011 | 1,300(.30)+1,300=1,690 | 2012 | 1,690(.30)+1,690=2,197 | 2013 | 2,197(.30)+2,197=2,856.10 |

B. Calculate the year-to-year annual sales growth rates for LearnRite and estimate the compound growth rate over the 2009-2013 periods. Y | Annual Sales (in millions) | Annual Growth Rate | | 2009 | 1.00 | - | | 2010 | 9.60 | (9.60-1.00)/1.00=860.00% | | 2011 | 30.10 | (30.10-9.60)/9.60=213.54% | | 2012 | 67.80 | (67.80-30.10)/30.10=125.25% | | 2013 | 121.40 | (121.40-67.80)/67.80=79.06% | | Compound Growth Rate (2009-2013): [(121.40-1.00)^(1/4)]-1=2.31936=231.94% |

C. Estimate LearnRite’s expected market share in each year based on the given data. Y | Expected Market Share | 2009 | 1.00/1,000.00=0.10% | 2010 | 9.60/1,300=0.74% | 2011 | 30.10/1,690=1.78% | 2012 | 67.80/2,197=3.09% | 2013 | 121.40/2,856.10=4.25% |

D. Estimate the firm’s net income (loss) in each of the five years. Y | Net Income (in millions) | Gross Proft Based on GPM (in millions) | Operating Expenses (in millions) | Net Profit Margin | 2009 | -2.70 | 1.00(.30)=0.30 | 3.00 | - | 2010 | -2.12 | 9.60(.30)=2.88 | 5.00 | - | 2011 | 3.01 | 30.10(.30)=9.03 | - | 10% | 2012 | 6.78 | 67.80(.30)=20.34 | - | 10% | 2013 | 12.14 | 121.40(.30)=36.42 | - | 10% |

E. Estimate the firm’s return on assets beginning when the net or after-tax income is expected to be positive.
Return on Assets (start when positive): Net Profit Margin x Asset Turnover Ratio Y | Return on Assets | Asset Turnover of 2 | 2011 | 6.02 | 3.01(2) | 2012 | 13.56 | 6.78(2) | 2013 | 24.28 | 12.14(2)

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