Question

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 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 the following additional revenues, COGS and Operating Costs: Revenues COGS Operating costs $540,000.00 $340,200.00 $84,789.00 $538,380.00 $333,795.60 $86,345.00 $542, 110.50 $346,950.72 $82,789.00 $543,618.90 $342,479.91 $88,453.00 $539,330 $334,384 $86,357 Business ordinary tax rate is 29%. You take a loan for the entire $150,000 at 6% interest rate over 5 years. 1. Develop the Deprecation Table and Amortization Table 2. 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 iii. Financing Cash Flows iv. Net Cash Flow

Answer 1

Answer Joe Esténuate that the investment will Generate followerty additional sevenues co&S f operating Expenses. Depreciation Table Laah Couti Salon Table. na MACRS % Depn. Amit Year Loan bal. 32 32 49995 150000 120 444645 66675 - 190000 eu 14.81 22215 150000 70441 11115 Teollo 150000 100 150000 150000 100 Scanned with CamScanner

Income statement year I 11 g 13 Revenues 540000 538380 542110.5543618.9 1599398.4 COGS_ 1340800 333795-60-34695072 -349479.91-334281185 make-847789-86345 -88789 -88453-86357 Dopo -49996-66675 22915 -11116 Gain on sale 35000 of equipment operating 165016 51664.4 90165078101570.99 15356.65 | in(cone|Eer| Interest Expense |-9000 -9000 -9000 9000 -9000 FBT 156016 4256674/81155789857099 144588.55 Taxat 29% +162446-12343.68 -2353518-26845-59-41930.68 Net income 39771.3613622D-721576201604165725408|102657-78 * Cash following flowes for the pooject © Operating cash flows Net 69771.86 20220-724/546820-601q 165725408 1086 57.87 Income Add Back 199956667528215 11116 DePR SOCFI wi89766.3696895172 79835060 76840.40 10265787

® Processing cash flouse ina De © Purchase of I equipment Sale proceeds of equipment 2500 Investing Cash - 150000 | o flows 1o o 35.000 financing cash flows Loan pooceed 150000 repu Loan Repayment of -150000 lo lo -15000 financing 150000 o PO Net cash flows Ald. Bigo Net cash 189766.3696896784179835-604 76840.403 418342.13 flow 89766,26 186662.08 266497069 343338.09 Cash End 89766-36 18666•08 26644769348338009 33091596 I Cash Scanned with CamScanner canned with _ * a