Question

In: Finance

See Income Statement: Sales $825,000 Less:variable cost[(825,000*55)/100] $453,750 Less: fixed cost $187,150 Less: depriciation $91,000 Earnings...

See Income Statement:

Sales $825,000
Less:variable cost[(825,000*55)/100] $453,750
Less: fixed cost $187,150
Less: depriciation $91,000
Earnings before tax(EBT) $93,100
Less:Taxes@35%[(93,100*35)/100] $32,585
Projected net income $60515

If the project costs $2,000,000, lasts for 6 years and the cost of capital is 15%, compute the NPV and IRR for the project.

Solutions

Expert Solution

NPV @15% - ($797,989)

IRR- 3.40%

Calculation of Depreciation-Machinery
Year
1 2 3 4 5 6
Investment 2000000 1909000 1818000 1727000 1636000 1545000
Depreciation Rate
Depreciation 91000 91000 91000 91000 91000 91000
Value at Year End 1909000 1818000 1727000 1636000 1545000 1454000
CASH FLOW CALCULATION OF THE PROJECT
Year
1 2 3 4 5 6
Operating Income After Tax -A 60515 60515 60515 60515 60515 60515
Depreciation-B 91000 91000 91000 91000 91000 91000
Sale of machinery-C* 1454000
Net Cash Flow -D =(A-B+C) 151515 151515 151515 151515 151515 1605515
Cash Flow from Income Side 151515 151515 151515 151515 151515 1605515
* We assume that after 6 years we will be able to sell the machinery at written down value
Calculation of NPV Calculation of NPV Calculation of IRR
Cash Outflow Machiney 2000000 Machinery (2,000,000)
2000000 0 (2,000,000)
Cash In Flow
Year Cash Inflow (A) Discounting Factor @15%-B Discounted Cash Flow-C=(A*B)
1 151515     0.8696             131,752.17 1         151,515
2 151515     0.7561             114,567.11 2         151,515
3 151515     0.6575                99,623.57 3         151,515
4 151515     0.5718                86,629.19 4         151,515
5 151515     0.4972                75,329.73 5 151515
6 1605515     0.4323             694,108.44 6 1605515
         1,202,010.22
NPV of the Project is           (797,989.78) IRR 3.40%
Comments:
The results obtained above are based on the details provided. In case any information not shared may change the result.

Related Solutions

Freeport Company's income statement for last year is as follows: Income Statement Sales $300,000 Less: Cost...
Freeport Company's income statement for last year is as follows: Income Statement Sales $300,000 Less: Cost of goods sold 200,000 Gross margin 100,000 Less: Operating expenses 60,000 Income before taxes 40,000 Less: Income taxes 16,000 Net income $24,000 The beginning and ending balances for last year are available for the following accounts: Ending balance Beginning balance Accounts receivable $32,000 $40,000 Inventory 60,000 50,000 Prepaid expenses 12,000 8,000 Accumulated depreciation (40,000) (30,000) Accounts payable 30,000 45,000 Accrued liabilities 16,000 10,000 Income...
a proposed new investment has projected sales of $825,000. Variable costs are 55 percent of sales...
a proposed new investment has projected sales of $825,000. Variable costs are 55 percent of sales and fixed costs are $237,150; depreciation $91,000 per year. Prepare a pro forma income statement assuming a tax rate of 25 percent. What is projected net income? If the project costs $2,000,000, lasts for 6 years and the cost of capital is 15%, compute the NPV and IRR for the project.
Flamingo, Inc. 2019 statement of comprehensive income ($ in millions) Net sales $1,384 Less: Cost of...
Flamingo, Inc. 2019 statement of comprehensive income ($ in millions) Net sales $1,384 Less: Cost of goods sold 605 Less: Depreciation 180 Earnings before interest and taxes 599 Less: Interest paid 80 Taxable income 519 Less: Taxes 156 Net income $363 Addition to retained earnings $254 Dividends paid 109 Flamingo, Inc. 2018 and 2019 Statement of financial positions ($ in millions) 2018 2019 2018 2019 Cash $100 $121 Accounts payable $400 $350 Accounts rec. 350 425 Notes payable 390 370...
Flamingo, Inc. 2019 statement of comprehensive income ($ in millions) Net sales $1,384 Less: Cost of...
Flamingo, Inc. 2019 statement of comprehensive income ($ in millions) Net sales $1,384 Less: Cost of goods sold 605 Less: Depreciation 180 Earnings before interest and taxes 599 Less: Interest paid 80 Taxable income 519 Less: Taxes 156 Net income $363 Addition to retained earnings $254 Dividends paid 109 Unit 2 Exercise Questions Flamingo, Inc. 2018 and 2019 Statement of financial positions ($ in millions) 2018 2019 2018 2019 Cash $100 $121 Accounts payable $400 $350 Accounts rec. 350 425...
Income Statement 2019 Common Size Income Statement Details 2019 2018 Sales 30,000,000 Sales/Sales 100.00% 100.00% Less:...
Income Statement 2019 Common Size Income Statement Details 2019 2018 Sales 30,000,000 Sales/Sales 100.00% 100.00% Less: Cost of Goods Sold 21,000,000 Cost of Goods Sold/Sales 70.00% 65.90% Gross Profits 9,000,000 Gross Profits/Sales 30.00% 34.10% Less: Operating Expenses Less: Operating Expenses Selling Expense 3,000,000 Selling Expense/Sales 10.00% 12.70% General and Administrative Expenses 1,800,000 General and Administrative Expenses/Sales 6.00% 6.30% Lease Expense 200,000 Lease Expenses/Sales 0.67% 0.60% Depreciation Expense 1,000,000 Depreciation Expense/Sales 3.33% 3.60% Total Operating Expense 6,000,000 Total Operating Expense/Sales 20.00%...
Bayside Inc. 2005 Income Statement ($ in thousands) Net sales $5,680 Less: Cost of goods sold...
Bayside Inc. 2005 Income Statement ($ in thousands) Net sales $5,680 Less: Cost of goods sold 4,060 Less: Depreciation 420 Earnings before interest and taxes 1,200 Less: Interest paid 30 Taxable Income $1,170 Less: Taxes 410 Net income $ 760 Bayside, Inc. 2004 and 2005 Balance Sheets ($ in thousands) 2004 2005 2004 2005 Cash $ 70 $ 180 Accounts payable $1,350 $1,170 Accounts rec. 980 840 Long-term debt 720 500 Inventory 1,560 1,990 Common stock 3,200 3,500 Total $2,610...
Nabors Inc. 2009 Income Statement ($ in millions) Bet Sales $9,610 Less: Cost of Goods Sold...
Nabors Inc. 2009 Income Statement ($ in millions) Bet Sales $9,610 Less: Cost of Goods Sold 6,310 Less Depreciation 1,370 Earnings before interest and taxes 1,930 Less: Interest paid 630 Taxable income $1,300 Less taxes 455 Net Income $   845 Nabors Inc. 2008 and 2009 Balance sheets ($ in millions) 2008 2009 2008 2009 Cash $310 $405 Accounts Pay $2720 $2570 Accounts Rec. 2640 3055 Notes Pay 100 0 Inventory 3275 3850 Total $2820 $2570 Total $6225 $7310 Long Term...
income statement and retained earnings statement
Misclassifcations Roz Corporation's Multiple-Step income statement and retained earnings statement for the year ended December 31, 2019 as developed by its bookkeeper are shown here: Revenue StatementDecember 31, 2019   Sales (net)     $179,000 Plus: Income from operations of discontinued Division P (net of $960 income taxes)     2,240 Less: Dividends declared ($1.50 per common share)     (7,500) Net revenues     $173,740 Less: Selling expenses     (19,000) Gross profit     $154,740 Less Operating expenses:       Interest expense $4,100     Loss on sale of Division P (net of $1,200 income...
On a firm's income statement, you likely will see two entries for earnings per share (EPS):...
On a firm's income statement, you likely will see two entries for earnings per share (EPS): basic and diluted EPS. Basic EPS is the firm's net income available to shareholders divided by the number of shares of common stock. However, while common shares are definite claims of an owner's equity, unexercised stock options, convertible debt and preferred stock, and warrants represent potential claims on an owner's equity. If they are exercised or converted, the number of common shares may increase....
Kramerica Industries (KI) 2015 Income Statement Sales $422,045    Cost of goods sold 291,090    Depreciation 37,053 Earnings...
Kramerica Industries (KI) 2015 Income Statement Sales $422,045    Cost of goods sold 291,090    Depreciation 37,053 Earnings before interest and taxes $93,902    Interest expense 16,400 Earnings before taxes $77,502    Taxes 27,126 Net income $50,376    Dividends    Additions to retained earnings    Kramerica Industries (KI) 2014 and 2015 Balance Sheets 2014 2015 2014 2015 Cash $26,450 $29,106 Accounts payable $61,722 $69,426 Accounts receivable 13,693 18,282 Long-term debt 95,000 110,000 Inventory 27,931 32,586 Common stock 45,000 45,000 Net fixed assets 357,165 398,345 Retained earnings...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT