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MGT 325 Module 6 Spreadsheet Exam Part A,,COMPREHENSIVE CHAPTER 12 & 13 PROBLEMS,MONARCH CORPORATION IS GOING TO START A NEW PRODUCT LINE OF PRODUCTS IN A WHOLE NEW MARKET.,THE DATA FOR ANALYSIS IS PRESENTED BELOW:,,COST OF THE EQUIPMENT NEEDED $194,000 FIVE YEAR PROPERTY FOR TAX DEPRECIATION,NEW WORKING CAPITAL NEEDS $50,000 WILL BE RECOVERED AT THE END OF THE THIRD YEAR,PROJECTED NEW REVENUES:,SALES PROBABILITY,$200,000 30%,$250,000 50%,$300,000 20%,COST OF GOOD SOLD 30% OF SALES,VARIABLE CASH COSTS 10% OF SALES,ANNUAL FIXED CASH COSTS:,RENT $50,000,CLEANING $20,000,MAINTENANCE & OTHER $10,000,TOTAL FIXED COSTS $80,000,EQUIPMENT DISPOSAL PROCEEDS $19,400 SALVAGE VALUE AT THE END OF YEAR 6,FIRM’S COST OF CAPITAL 12.00%,TAX RATE 35%,NOTE – WHEN COMPUTING TAX, A NET LOSS FOR THE YEAR MEANS A POSITIVE TAX SAVINGS IS CREATED,SINCE THERE IS OTHER INCOME TAX ON OTHER INCOME TO OFFSET.,DEPRECIATION RATES FOR TAX PURPOSES:,YEAR ONE 20.00%,YEAR TWO 32.00%,YEAR THREE 19.20%,YEAR FOUR 11.50%,YEAR FIVE 11.50%,YEAR SIX 5.80%,ASSUMPTIONS:,ALL CASH FLOWS IN YEARS 1-6 OCCUR AT THE END OF THE YEAR. ALL INITIAL CASH INFLOWS OR,OUTFLOWS OCCUR TODAY.,,REQUIRED:,A. ASSUMING SALES ARE $200,000 COMPUTE THE PAYBACK, IRR AND NPV. FOR THE NPV, COMPUTE,AT BOTH THE FIRM’S DISCOUNT RATE AND 16%, WHICH IS A 4% PREMIUM ADDED TO THE RATE.,B. COPY THE WHOLE WORKSHEET AND SOLUTIONS FOR PART A TO THE WORKSHEET NAMED PART B,,AND REDO THE COMPUTATIONS BY CHANGING THE ANNUAL SALES TO $250,000.,C. COPY THE WHOLE WORKSHEET AND SOLUTIONS FOR PART A TO THE WORKSHEET NAMED PART C,,AND REDO THE COMPUTATIONS BY CHANGING THE ANNUAL SALES TO $300,000.,,You should place your answers in each of the boxes shown below color-coded in Yellow color.,,PART A,YEARS 0 1 2 3 4 5 6,INITIAL INVESTMENT (NO INCOME TAX AFFECTS),COST OF THE EQUIPMENT NEEDED $,WORKING CAPITAL NEEDS,TOTAL INITIAL INVESTMENT,,ANNUAL OPERATING RECEIPTS: (using the information given above, fill in the blanks below to determine each year’s operating cash flow):,SALES $ $ $ $ $ $,LESS COST OF GOODS SOLD,GROSS PROFIT,LESS VARIABLE COSTS,LESS FIXED COSTS,LESS DEPRECIATION EXPENSE,PROFIT (LOSS) BEFORE TAX,LESS INCOME TAX EXPENSE (BENEFIT),PROFIT (LOSS) AFTER TAX,PLUS DEPRECIATION EXPENSE,TOTAL OPERATING CASH INFLOWS $ $ $ $ $ $,,SALVAGE VALUE ON EQUIPMENT: (figure out the salvage value of the equipment for tax purposes):,PROCEEDS $,LESS TAX BASIS OF EQUIPMENT:,COST,ACCUMULATED DEPRECIATION,TAX BASIS,GAIN ON SALVAGE,LESS INCOME TAX ON SALVAGE GAIN,NET PROCEEDS ON SALVAGE AFTER TAXES $,,RELEASE OF ORIGINAL WORKING CAPITAL NEEDS (NO TAX AFFECT) $,,TOTAL CASH INFLOWS (OUTFLOWS),CUMULATIVE CASH INFLOWS (OUTFLOWS),,THREE METHODS OF EVALUATION:,PAYBACK PERIOD YEARS (round to 2 decimal places).,INTERNAL RATE OF RETURN Answer is in %-2 decimal places please.,NET PRESENT VALUE AT 12.00% Answer is in $-round answer to nearest dollar.,NET PRESENT VALUE AT 16.00% Answer is in $-round answer to nearest dollar.,,,Note: Pages 375-380 in your course textbook show you how to calculate the Payback Period, the Internal Rate of Return, and the NPV.,,This is a three part question a, b, and c.

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