Josephine has been through several start up situations and has the time, wealth
ID: 2624651 • Letter: J
Question
Josephine has been through several start up situations and has the time, wealth and connections to do another one. She is now planning the next startup that looks very promising with sales expected to double every year. Following is the information that has been collected and the expected income statement. The investments, depreciation and book value results are provided below and are to be used as they are presented.
Help Josephine with her 5-year plan by preparing a cash flow statement and determine the present worth and future worth of this proposal.
Expected Sale Price in year 5
$125,000,000
Income Tax rate
20%
Capital Gains Tax rate
12%
MARR
20%
Year
0
1
2
3
4
5
Annual Investment
$5,000,000
$10,000,000
$20,000,000
$30,000,000
$30,000,000
$0
Annual Depreciation
$1,000,000
$5,200,000
$11,040,000
$17,776,000
$24,048,000
Book Value
$5,000,000
$14,000,000
$28,800,000
$47,760,000
$59,984,000
$35,936,000
Working Capital
0
1
2
3
4
5
Accounts Receivable
$0
$250,000
$400,000
$550,000
$700,000
$850,000
Inventory
$10,000
$100,000
$150,000
$200,000
$250,000
$300,000
Accounts Payable
$20,000
$180,000
$180,000
$180,000
$180,000
$180,000
Wages Payable
$5,000
$50,000
$65,000
$80,000
$95,000
$110,000
Income Statement
0
1
2
3
4
5
Revenue
$3,000,000
$6,000,000
$12,000,000
$24,000,000
$48,000,000
COGS
($900,000)
($1,800,000)
($3,600,000)
($7,200,000)
($14,400,000)
Gross Margin
$2,100,000
$4,200,000
$8,400,000
$16,800,000
$33,600,000
SG&A
($180,000)
($315,000)
($551,250)
($964,688)
($1,688,203)
Depreciation
($1,000,000)
($5,200,000)
($11,040,000)
($17,776,000)
($24,048,000)
EBIT
$920,000
($1,315,000)
($3,191,250)
($1,940,688)
$7,863,797
Tax
($184,000)
$263,000
$638,250
$388,138
($1,572,759)
Net Income
$736,000
($1,052,000)
($2,553,000)
($1,552,550)
$6,291,038
Help Josephine with her 5-year plan by preparing a cash flow statement and determine the present worth and future worth of this proposal.
Expected Sale Price in year 5
$125,000,000
Income Tax rate
20%
Capital Gains Tax rate
12%
MARR
20%
Year
0
1
2
3
4
5
Annual Investment
$5,000,000
$10,000,000
$20,000,000
$30,000,000
$30,000,000
$0
Annual Depreciation
$1,000,000
$5,200,000
$11,040,000
$17,776,000
$24,048,000
Book Value
$5,000,000
$14,000,000
$28,800,000
$47,760,000
$59,984,000
$35,936,000
Working Capital
0
1
2
3
4
5
Accounts Receivable
$0
$250,000
$400,000
$550,000
$700,000
$850,000
Inventory
$10,000
$100,000
$150,000
$200,000
$250,000
$300,000
Accounts Payable
$20,000
$180,000
$180,000
$180,000
$180,000
$180,000
Wages Payable
$5,000
$50,000
$65,000
$80,000
$95,000
$110,000
Income Statement
0
1
2
3
4
5
Revenue
$3,000,000
$6,000,000
$12,000,000
$24,000,000
$48,000,000
COGS
($900,000)
($1,800,000)
($3,600,000)
($7,200,000)
($14,400,000)
Gross Margin
$2,100,000
$4,200,000
$8,400,000
$16,800,000
$33,600,000
SG&A
($180,000)
($315,000)
($551,250)
($964,688)
($1,688,203)
Depreciation
($1,000,000)
($5,200,000)
($11,040,000)
($17,776,000)
($24,048,000)
EBIT
$920,000
($1,315,000)
($3,191,250)
($1,940,688)
$7,863,797
Tax
($184,000)
$263,000
$638,250
$388,138
($1,572,759)
Net Income
$736,000
($1,052,000)
($2,553,000)
($1,552,550)
$6,291,038
Explanation / Answer
future worth = $19,927,242.32*1.2^5=$ 49,585,355.61
Full answer in excel sheet. Please rate
Present worth = -$5,000,000 -8,399,000/1.2 -16,037,000/1.2^2 -21,698,000/1.2^3 -13,961,550/1.2^4 +30,154,038/1.2^5 + $125,000,000/1.2^=$19,927,242.32future worth = $19,927,242.32*1.2^5=$ 49,585,355.61
Full answer in excel sheet. Please rate
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