Computation of Annual Income Tax | ||||||
Now | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Sales revenues | $390,000 | $390,000 | $390,000 | $390,000 | $390,000 | |
Less: Variable expenses | $215,000 | $215,000 | $215,000 | $215,000 | $215,000 | |
Less: Fixed out-of-pocket operating costs | $89,000 | $89,000 | $89,000 | $89,000 | $89,000 | |
Less: Depreciation (160000 / 5) | $32,000 | $32,000 | $32,000 | $32,000 | $32,000 | |
Profit Before tax (a) | $54,000 | $54,000 | $54,000 | $54,000 | $54,000 | |
Tax (aX30%) | $16,200 | $16,200 | $16,200 | $16,200 | $16,200 | |
Computation of Net Present Value | ||||||
Now | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Profit Before Tax | $54,000 | $54,000 | $54,000 | $54,000 | $54,000 | |
Less: Tax (aX30%) | $16,200 | $16,200 | $16,200 | $16,200 | $16,200 | |
PAT (a) | $37,800 | $37,800 | $37,800 | $37,800 | $37,800 | |
Depreciation (160000 / 5) (b) | $32,000 | $32,000 | $32,000 | $32,000 | $32,000 | |
Annual Cash Flow (a+b) | $69,800 | $69,800 | $69,800 | $69,800 | $69,800 | |
Cash outflow | -$160,000 | |||||
Net Cash Flow | -$160,000 | $69,800 | $69,800 | $69,800 | $69,800 | $69,800 |
PVF @17% | 1 | 0.854700855 | 0.730513551 | 0.624370556 | 0.533650048 | 0.456111152 |
Present Value | -$160,000 | $59,658 | $50,990 | $43,581 | $37,249 | $31,837 |
Net Present Value | $63,314 |
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period....
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a piece of equipment for $155,000. The equipment would have a useful life of five years and zero salvage value. It would be depreciated for financial reporting and tax purposes using the straight-line method. After careful study, Winthrop estimated the following annual costs and revenues for the new product: Annual revenues and costs: Sales...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years $ 265,000 $ 88,000 $ 8.000 $ 14,000 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 440,...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 220,000 Working capital needed $ 81,000 Overhaul of the equipment in year two $ 7,500 Salvage value of the equipment in four years $ 10,500 Annual revenues and costs: Sales revenues $ 370,000 Variable expenses $ 180,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new
product for a four-year period. The company's discount rate is 17%.
After careful study, Oakmont estimated the following costs and
revenues for the new product:
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product $ 165,000 $ 67,000 $ 10,000 $ 13,000...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years $ 275,000 $ 86,000 $ 10,000 $ 13,000 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 420,000...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years $ 270,000 $ 85,000 $ 8,000 $ 12,500 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $410,000 $...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: $ 145,000 63,000 9,500 13,500 Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years Annual revenues and costs: $ 280,000 $ 135,000 $ 73,000 Sales revenues Variable expenses Fixed out-of-pocket operating...
kmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 225,000 Working capital needed $ 80,000 Overhaul of the equipment in year two $ 7,000 Salvage value of the equipment in four years $ 10,000 Annual revenues and costs: Sales revenues $ 360,000 Variable expenses $ 175,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 270,000 Working capital needed $ 85,000 Overhaul of the equipment in year two $ 8,000 Salvage value of the equipment in four years $ 12,500 Annual revenues and costs: Sales revenues $ 410,000 Variable expenses $ 200,000 Fixed out-of-pocket...
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: $310,000 $ 68,000 $ 22.000 Cost of equipment needed Working capital needed Repair the equipment in two years Annual revenues and costs Sales revenues Variable expenses Fixed out-of-pocket operating costs $430,000 $220,000 $ 96,000 The piece of equipment mentioned above has a useful life of five years and zero salvage value....