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With the following information calculate the after tax cash flows from

With the following information, calculate the after-tax cash flows from operations.

Accounts Amounts

Revenue...............$3,000,000

Finance costs ............. 100,000

Income tax expense ......... 175,000

Cost of sales ............1,800,000

Distribution costs .......... 400,000

Administrative expenses ....... 300,000

Depreciation expense of $100,000 is included in distribution costs and depreciation expense of $200,000 is included in cost of sales.

1. Calculate the value of the business as a going concern by using the following capitalization rates: 10%, 20%, 30%, and 40%.

2. Use a 20% discount rate to calculate the present value of the business if it had a five-year lifespan and a ten-year lifespan.

3. If an investor were to invest $400,000 in the business, how much cash should the business generate each year during a 10-year period if the investor wants to earn 30%?

Accounts Amounts

Revenue...............$3,000,000

Finance costs ............. 100,000

Income tax expense ......... 175,000

Cost of sales ............1,800,000

Distribution costs .......... 400,000

Administrative expenses ....... 300,000

Depreciation expense of $100,000 is included in distribution costs and depreciation expense of $200,000 is included in cost of sales.

1. Calculate the value of the business as a going concern by using the following capitalization rates: 10%, 20%, 30%, and 40%.

2. Use a 20% discount rate to calculate the present value of the business if it had a five-year lifespan and a ten-year lifespan.

3. If an investor were to invest $400,000 in the business, how much cash should the business generate each year during a 10-year period if the investor wants to earn 30%?

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