You have been hired to evaluate whether investors should purchase a company called “USB Music Cards to Roll”. You have been told that this business would likely perform financially exactly like “Video to Roll” did for the years 1980, 1981 and 1982. Your investors are looking to invest in a business for three years and then sell the same. In your analysis assume the following:

A. The “Video to Roll” cash flows for 1980, 1981 and 1982 would be exactly the same as the projected “USB Music Cards to Roll” cash flows for the years 2023, 2024 and 2025. For purposes of this exercise, treat the net income from each year as a cash flow.

B. The income tax rate for any calculations on any proposed financial statements for each year for “USB Music Cards to Roll” is 20%.

C. For 1980 only, the cost of goods sold for “Video to Roll” was 60% of Sales.

D. Dividends for “Video to Roll” were 50% of net income for each year 1980, 1981 and 1982.

E. Video to Roll had current assets of $10,000 for each of the years 1980, 1981 and 1982

Answer rating: 100% (QA)

In order to evaluate whether investors should purchase USB Music Cards to Roll it is necessary to an... View the full answer