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Mathematics
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University of Phoenix
Type
Homework
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Title of Your Essay
Your First and Last Name
The University of ………………….
Course Code: Name of Course
Instructor Name
Due Date

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1. Introduction
Custom Molds & Company intends to purchase new equipment that would cost
$300,0000 to cater to the increasing demand for custom molds and fabricated parts. The salvage
value after using the equipment for 4 years would be $15 000. The 4-year sales forecast,
information related to the depreciation, and other costs are indicated in the appendix. Following
analysis has been carried out to find the incremental cash flow for the next 4 years, NPV of the
projected cash flows, and sensitivity of the variables.
2. Analysis
2.1 Constructing annual incremental operating cash flow statements for the next 4 years
Total sales value and total cost values can be obtained by considering the inflation rate and the
year 1 value. The number of units produced and sold per year is given for years 1,2,3 and 4.
Assuming that there is no fixed cost following incremental cash flow can be constructed.
Table 1: Annual incremental operating cash flow
Description
Year 1
Year 2
Year 3
Year 4
Total sales
$360,000
$396,900
$423,720
$448,776
Total cost
$150,000
$165,375
$176,550
$186,990
- Depreciation
$113,988.60
$152,019.00
$50,650.20
$25,342.20
Operating Earnings before Tax
$96,011.40
$79,506.00
$196,519.80
$236,443.80
Taxes @ 42%
$40,324.79
$33,392.52
$82,538.32
$99,306.40
NOPAT
$55,686.61
$46,113.48
$113,981.48
$137,137.40
+ Depreciation
$113,988.60
$152,019.00
$50,650.20
$25,342.20
Net Operating Cash flow
$169,675.21
$198,132.48
$164,631.68
$162,479.60

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1 Title of Your Essay Your First and Last Name The University of …………………. Course Code: Name of Course Instructor Name Due Date 2 1. Introduction Custom Molds & Company intends to purchase new equipment that would cost $300,0000 to cater to the increasing demand for custom molds and fabricated parts. The salvage value after using the equipment for 4 years would be $15 000. The 4-year sales forecast, information related to the depreciation, and other costs are indicated in the appendix. Following analysis has been carried out to find the incremental cash flow for the next 4 years, NPV of the projected cash flows, and sensitivity of the variables. 2. Analysis 2.1 Constructing annual incremental operating cash flow statements for the next 4 years Total sales value and total cost values can be obtained by considering the inflation rate and the year 1 value. The number of units produced and sold per year is given for years 1,2,3 and 4. Assuming that there is no fixed cost following incremental cash flow can be constructed. Table 1: Annual incremental operating cash flow Description Year 1 Year 2 Year 3 Total sales $360,000 $396,900 $423,720 $448,776 Total cost $150,000 $165,375 $176,550 $186,990 $113,988.60 $152,019.00 $50,650.20 $25,342.20 Operating Earnings before Tax $96,011.40 $79,506.00 $196,519.80 $236,443.80 Taxes @ 42% $40,324.79 $33,392.52 $82,538.32 $99,306.40 NOPAT $55,686.61 $46,113.48 $113,981.48 $137,137.40 + Deprecia ...
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