Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $32,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $8,000. The grill will have no effect on revenues but will save Johnny’s $16,000 in energy expenses. The tax rate is 30%. Required:

a. What are the operating cash flows in each year?

b. What are the total cash flows in each year?

c. Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream.

Should the grill be purchased?

Answer for:

A. What are the 3-Year Operating Cash Flows?

Year 1

Year 2

Year 3

B. What are the total cash flows in each year? (Negative amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Total Cash Flows

Year 0 $(32,000.00)

Year 1

Year 2

Year 3

C. Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream.

Should the grill be purchased? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

What is the NPV of cash flow stream?

Should the grill be purchased?

Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by a MBA student. The production line would be set up in unused space (Market Value Zero) in Sugar Land’ main plant. Total cost of the machine is $350,000. The machinery has an economic life of 4 years and will be depreciated using MACRS for 3-year property class. The machine will have a salvage value of $35,000 after 4 years.

The new line will generate Sales of 1,750 units per year for 4 years and the variable cost per unit is $110 in the first year. Each unit can be sold for $210 in the first year. The sales price and variable cost are expected to increase by 3% per year due to inflation. Further, to handle the new line, the firm’s net working capital would have to increase by $30,000 at time zero (No change in NWC in years 1 through 3 and the NWC will be recouped in year 4). The firm’s tax rate is 40% and its weighted average cost of capital is 11%.

**** Estimate the after tax salvage cash flow

*******Estimate the net cash flow of this project

Year zero

Year 1

Year 2

Year 3

Year 4

Estimate the NPV, IRR, MIRR, and profitability Index of the project.

Blue Jeans Corp. has done an analysis of whether to continue offering a new line of jeans or to halt operations, this analysis cost $250,000. The new product has expected sales at the end of this year of $800,000 and this grow every year by 3%. This product has created some cannibalization worth $75,000 of sales reduction each year. COGS is $200,000 at the end of this year and will also grow every year by 3%. COGS related to the cannibalized product is $25,000 each year. The line of jeans will be in production for three years, afterwards they become obsolete. The equipment cost of $2M ($2 million) was spent at the beginning of this year (t=0) and it has a 40% CCA rate. The space for the equipment could have received $10,000 each year in its next best alternative use. Interest charges are $50,000 annually. There will be a one-time net working capital increase of $20,000 at the end of year one; this will be recovered at the end of year 3. The firm demands a 5% return on projects such as this. The corporate tax rate is 30%. Assume that at the end of year 3 the equipment is sold for $0 and does not bring any tax consequences thereafter. What is the NPV of this project?

A $584,434 （I know this is the answer but I dont know the process please）

B -$550,910

с $354,306

D$547,368

E $531,847

Kelly Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Kelly produced 61,000 units and sold 48,250 units. During its second year of operations, it produced 61,000 units and sold 73,750 units. The selling price of the company’s product is $53 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses a variable costing system that assigns $13.00 of direct labor cost to each unit produced:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1 and 2.

Kelly Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Kelly produced 61,000 units and sold 48,250 units. During its second year of operations, it produced 61,000 units and sold 73,750 units. The selling price of the company’s product is $53 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses a variable costing system that assigns $13.00 of direct labor cost to each unit produced:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1 and 2.

Kelly Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Kelly produced 68,000 units and sold 53,500 units. During its second year of operations, it produced 68,000 units and sold 82,500 units. The selling price of the company’s product is $60 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses a variable costing system that assigns $16.50 of direct labor cost to each unit produced:

a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1 and 2.

The following is the income statement for Harry Potter’s business operations last year.

The following information is supplied for preparation of the budgets for coming year:

• Annual sales are expected to increase by 10% each year.
• Expected average gross profit margin is 30%
• Advertising costs are expected to increase by $800 each year.
• Depreciation charges are the same each year.
• Interest paid is the same each year.
• Annual rent is expected to increase by 6% each year.
• Superannuation is 9% of wages
• Wages paid are expected to increase by 5% each year.
• All other operating expenses are expected to increase by 4% each year.

Requirement:

Using the above information, prepare the budget for year 2008. (FNSCORG609A/03-3) Do not use Microsoft word

Ratio of Liabilities to Stockholders' Equity

The Craft Bin, a major competitor of The Building Store in the home improvement business, operates over 1,600 stores. Craft Bin recently reported the following balance sheet data (in millions):

a. Determine the total stockholders' equity at the end of Years 2 and 1.

b. Determine the ratio of liabilities to stockholders' equity for Year 2 and Year 1. Round your answers to two decimal places.

c. Based on (b), which is true regarding the risk to the creditors?
_________________ (increased, decreased, or no change)

d. The Building Store, Inc., is the world's largest home improvement retailer and one of the largest retailers in the United States based on net sales volume. The Building Store operates over 2,200 Building stores that sell a wide assortment of building materials and home improvement and lawn and garden products.

The Building Store reported the following balance sheet data (in millions)

For Year 2, the creditors of which company are more at risk?
The Craft Bin

On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT’s retained earnings were $1,000,000. There was no acquisition differential. PAT accounts for its investment under the cost method. SAT sells inventory to PAT on a regular basis at a markup of 30% of selling price. The intercompany sales were $160,000 in Year 2 and $190,000 in Year 3. The total amount owing by PAT related to these intercompany sales was $60,000 at the end of Year 2 and $50,000 at the end of Year 3. On January 1, Year 3, the inventory of PAT contained goods purchased from SAT amounting to $70,000, while the December 31, Year 3, inventory contained goods purchased from SAT amounting to $80,000. Both companies pay income tax at the rate of 40%.

Selected account balances from the records of PAT and SAT for the year ended December 31, Year 3, were as follows:

Determine the amount to report on the Year 3 consolidated financial statements for the selected accounts noted above.

Your company is contemplating the purchase of a large stamping machine. The machine will cost $161,000. With additional transportation and installation costs of $5,000 and $12,000​, ​respectively, the cost basis for depreciation purposes is $178,000. Its MV at the end of five years is estimated as $39,000. The IRS has assured you that this machine will fall under a three year MACRS class life category. The justifications for this machine include $39,000 savings per year in labor and $26,000 savings per year in reduced materials. The​ before-tax MARR is 25​% per​ year, and the effective income tax rate is 50​%. Assume the stamping machine will be used for only three​ years, owing to the​ company's losing several government contracts. The MV at the end of year three is $50,000. What is the income tax owed at the end of year three owing to depreciation recapture​ (capital gain)?

Choose the correct answer below.

A. The income tax owed at the end of year three is $11,815.

B. The income tax owed at the end of year three is $24,000.

C. The income tax owed at the end of year three is ​$36,810.

D. The income tax owed at the end of year three is ​$23,629.

E. The income tax owed at the end of year three is ​$18,405.

The answer is A. Can you please show the steps to solve this in Excel?