Question

Please answer number 3

Problem 2 Sleep Tight Motel has the opportunity to purchase an adjacent plot of land. Building on this land would increase their capacity from the current sales level of $515,000/year to $600,000/year. Sleep Tight experiences a 20 percent before-tax profit margin. It wishes to estimate the additional before-tax profits that the expansion will produce. |+(You can copy this table to Excel to make your calculations.) Capacity Requirement (Annual Sales) $515,000 $517,000 $520,000 $525,000 $540,000 $560,000 $565,000 $575,000 $600,000 $620,000 Year 2 4 5 6 10 1. How much more (additional) before-tax cash flow would be realized in year 6 alone due to this expansion? 45,000 2 = $9,000 $560,000 $515,000 - 2. Using the following information, how much more (additional) before-tax cash flow would be realized in year 10 alone due to this expansion? $620,000 $515,000 105,000 2 = $21,000 - 3. Using the following information, how much more (additional) before-tax cash flow would be realized in the next 10 years due to this expansion?

Answer 1

3.

Year 1 2 5 Annual Sales Additional sales Before-tax cash flow 515000 517000 2000 400 520000 5000 1000 525000 10000 2000 540000 25000 5000 560000 45000 9000 565000 50000 10000 575000 60000 12000 600000 85000 17000 620000 105000 21000 Before-tax cash flow for 10 years 77400 10 Additional sales of every year s calculated with respect to the sales in the first year.