Conservative Financial Projections Were Prepared

The engineering department prepared an estimate of the expenses that were anticipated for the Jumbo-Koter venture. These included the up-front investment in new equipment. The marketing department then prepared an initial and multiyear sales forecast, as well as forecasted profit and loss statements. The purpose of these financial projections was to show that the Jumbo-Koter venture would produce a satisfactory return on investment, assuming that the project unfolded as expected.

The financial projections were conservative in that they did not include any estimates of sales from the large national accounts such as Lowes or Home Depot. Only sales from paint and hardware stores were included. The reason for this was to add stability to the forecasts. Wooster Brush management felt that it could confidently predict potential sales from the traditional paint and hardware stores, based on a long history with these accounts. Predictions for the large national accounts were much less reliable. Management did not want to develop production capacity based on speculative assumptions.