Kounu 0 Only legible writing will be graded Honor System strictly enforced A com
ID: 1175521 • Letter: K
Question
Kounu 0 Only legible writing will be graded Honor System strictly enforced A comp any invests in a special HVAC system worth $175,000 at the beginning of the year. They expect the following cash flows for the next 5 years related to the HVAC investment. $50,000 in electricity per year $10,000 in operations cost per year, expected to rise 10% each year after year 1. They are less certain about revenue. $5,000 for maintenance per year Best case they will make $600,000. Worst case $125,000. Most likely, they will earn $400,00 The company's MARR 10%Explanation / Answer
1) Company's expected revenues during the period are as under, note we give higher weight to most likely scenario because it is based on company's historicals
2) The amount company should set aside to meet its estimated cost during this period is
The amount company should set aside to meet all its expenses is $230861.65
3) To compute double declining balance depreciation, we perform below calculation
4)
Expected Taxable Net Income is
Revenues Year Weight 1 2 3 4 5 Best case 25% 600000 600000 600000 600000 600000 Worst case 25% 125000 125000 125000 125000 125000 Most Likely 50% 400000 400000 400000 400000 400000 Expected Revenue (Weight* Revenue) 381250 381250 381250 381250 381250Related Questions
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