a. Create & tak tu shown above. Your spreadsheet should then calculate the margi

Question

a. Create & tak tu shown above. Your spreadsheet should then calculate the marginal tax ralé, the average tax rate, and the tax bill for any level of taxable income input by a user b. For a taxable income of $1,350,000, what is the marginal tax rate? c. For a taxable income of $1,350,000, what is the total tax bill? d. For a taxable income of $1,350,000, what is the average tax rate? MINICASE Cash Flows and Financial Statements at Sunset Boards, Inc. Sunset Boards is a small company that manufactures and sells After rooting through old bank statements, sales receipts. surfboards in Malibu. Tad Marks, the founder of the company. tax returns, and other records, Christina has assembled the in charge of the design and sale of the surfboards, but his following information background is in surfing, not business. As a result, the compa- ny's financial records are not well maintained. The initial investment in Sunset Boards was provided by Tad and his friends and family. Because the initial investment was relatively small, and the company has made surfboards Cost of goods sold only for its own store, the investors haven't required detailed Cash financial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, andInterest expense Tad is considering a major expansion. His plans include open- ing another surfboard store in Hawaii, as well as supplying his sticks (surfer lingo for boards) to other sellers. 2017 2018 $322,742 55,725 $255,605 36,884 72.158 15,687 81,559 17.980 65,610 44.318 387,855 611.224 33.901 32.441 Selling and administratve Tad's expansion plans require a significant investment.Net fxed assets which he plans to finance with a combination of additional Sales funds from outsiders plus some money borrowed from banks. Accounts recelivable Naturally, the new investors and creditors require more orga-Notes payable nized and detailed financial statements than Tad has previously 26,186 318.345 501.441 26136 29,712 160,689 50.318 prepared. At the urging of his investors, Tad has hired finan nve cial analyst Christina Wolfe to evaluate the performance of the Inventory New equity 175.340 67,674 19.500 company over the past year

Explanation / Answer

1(A). The cost of goods sold as a percentage of sales increased from about 51% in 2017 to 52% in 2018. So, the owner must try to reduce the cost of goods sold and bring in operational efficiencies

(b) The selling and admin expenses also increased drastically in 2018. This may be because of increased expansion where he has to do sales promotions in new areas. This is fine for this year and the next, but gradually he should try to reduce this

(c) Third, most important the debt is already very high. Shareholders will not like to see more debt. Also the banks will not like to give more debt to a business that already has such a high debt. So, its better to convert some debt to equity before exploring the options to finance

2. I suggest Tad to hold on for a year or two. Reduce the debt and increase operational efficiency. Then look at expansion as investors and creditor would like to see a good and a healthy income statement wherein the business has long term sustainability.

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