Question 4: You are looking to invest $150,000 in some small manufacturing equip

Question

Question 4: You are looking to invest $150,000 in some small manufacturing equipment to augment your present production capabilities. The equipment is to be depreciated according to a 3-year class (MACRS-3). You estimate that you will be able to salvage the equipment for $35,000 in five years time. You estimate that the investment will generate following additional revenues, COGS and Operating expenses: Revenues COGS 540,000.00 $538,380.00 5542,110.50 $543,618.90 $539,330.40 $340,200.00 $333,795.60 $346,950.72 $342,479.91 $334,384.85 6,357.00 Costs 89.00 345.00 82,789.00 453.00 Business ordinary tax rate is 29%. You take a loan for the entire $150,000 at 6% interest rate over 5 years. 1. 2. Develop the Deprecation Table and Amortization Table Calculate the: a. Net Income for the project (Income Statement) b. Following cash flows for the project: i. Operating Cash Flows ii. Investing Cash Flows ii. Financing Cash Flows iv. Net Cash Flow

Explanation / Answer

There is no information on the dbt repayment schedule

so two cases of equal repayment in the rest 4 years and one bullet payment in the last year are discussed

i) Equal repayment in 4 years

ii)Single bullet repayment of loan in the last year

P&L Year 1 Year 2 Year 3 Year 4 Year 5 Revenues 540000.00 538380.00 542110.50 543618.90 539330.40 COGS 340200.00 33395.60 346950.75 34249.91 334384.85 Gross Margin 199800.00 504984.40 195159.75 509368.99 204945.55 Operating Costs 8489.00 84345.00 8289.00 88453.00 86357.00 EBITDA 191311.00 420639.40 186870.75 420915.99 118588.55 Dep & Amort 49995.00 66675.00 22215.00 11115.00 0.00 EBIT 141316.00 353964.40 164655.75 409800.99 118588.55 Interest @6% of Remaining Debt 9000.00 6750.00 4500.00 2250.00 0.00 PBT 132316.00 347214.40 160155.75 407550.99 118588.55 Tax @29% 38371.64 100692.18 46445.17 118189.79 34390.68 PAT 93944.36 246522.22 113710.58 289361.20 84197.87 Cashflow Operations Cashflow 182311.00 413889.40 182370.75 418665.99 118588.55 NI 93944.36 246522.22 113710.58 289361.20 84197.87 Depreciation 49995.00 66675.00 22215.00 11115.00 0.00 Tax 38371.64 100692.18 46445.17 118189.79 34390.68 Investing Cashflow -150000.00 0.00 0.00 0.00 35000.00 Asset Capex -150000.00 Sale of Asset 35000.00 Financing Cashflow 150000.00 -37500.00 -37500.00 -37500.00 -37500.00 Debt 150000.00 Debt repaid equally in rest 4 years -37500.00 -37500.00 -37500.00 -37500.00 Net Cashflow 182311.00 376389.40 144870.75 381165.99 116088.55 Debt and Depreciation Schedule Remaining Debt from Asset 150000.00 112500.00 75000.00 37500.00 0.00 Depreciation % 33.33% 44.45% 14.81% 7.41% Depreciation 49995.00 66675.00 22215.00 11115.00

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.