Question

Five Year Discounted Cash Flow

Company XYZ can produce 5,000 widgets annually

Each widget is sold for $20 each and the company can increase their price by $2 per widget annually

Cost of goods is 10% of Gross Sales annually

Shipping Expenses are $20,000 in year 1 and increase 5% per annum

Operating Expenses are $25,000 in year 1 and increases $1 per widget per annum

Please prepare a 5 year pro-forma showing the net income after all the expenses mentioned above have been accounted for each year.

Answer 1

	Income statement
i	year	1	2	3	4	5
ii	Unit sold	5000	5000	5000	5000	5000
iii	Sales price	20.00	22.00	24.00	26.00	28.00
iv=ii*iii	Total revenue	100,000.00	110,000.00	120,000.00	130,000.00	140,000.00
v=10% of iv	Cost of goods sale	10,000.00	11,000.00	12,000.00	13,000.00	14,000.00
vi	Shipping Expenses	20,000.00	21,000.00	22,050.00	23,152.50	24,310.13
vii	Operating expenses	25,000.00	30,000.00	35,000.00	40,000.00	45,000.00
viii=v+vi+vii	Total expenses	55,000.00	62,000.00	69,050.00	76,152.50	83,310.13
ix=iv-viii	Net income	45,000.00	48,000.00	50,950.00	53,847.50	56,689.88