(Thousands) Net Sales Cost of Sales Cost of Goods Sold Gross Income Selling, general and Administrative...

 

 
 
 
 
 

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(Thousands) Net Sales Cost of Sales Cost of Goods Sold Gross Income Selling, general and Administrative Net Operating Income (NOI) Other Income & Expenses Extraordinary Gain (Loss) Interest Expense Net Profit Before Taxes Income Taxes Net Income 2017 (Year ended December 31) 2018 $8,000,000 $7,000,000 5,500,000 4,800,000 2,500,000 2,200,000 2,050,000 1,275,000 450,000 925,000 200,000 75,000 100,000 850,000 255,000 $595,000 $1,155,000 1,650,000 495,000 Balance Sheet (Thousands) Assets Current Assets Cash Receivables Inventories Raw Material Work-in-Process (WIP) Finished Goods (Year ended December 31) Total Inventory Other Current Assets Property Plant & Equipment Land & improvements, buildings Machinery & Equipment Less Accumulated depreciation Other Assets Total Assets Liabilities and Shareholder Equity Current Liabilities Accounts Payable Accrued compensation Other Current Liabilities Long Term Debt Deferred liabilities Other long-term liabilities Common shareholder's equity Common stock Additional paid-in capital Retained earnings 300,000 200,000 330,000 I 2020 $ 125,000 1,450,000 830,000 1,350,000 3,755,000 320,000 700,000 (350,000) 670,000 175,000 845,000 $4,600,000 400,000 100,000 200,000 700,000 600,000 160,000 150,000 900,000 500,000 1,590,000 $4,600,000 250,000 180,000 250,000 $ 2019 200,000 1,000,000 680,000 1,200,000 3,080,000 300,000 675,000 (340,000) 635,000 150,000 785,000 $3,865,000 300,000 90,000 150,000 540,000 200,000 100,000 35,000 900,000 1,000,000 1,090,000 $3,865,000 You have been asked to evaluate an investment to replace an old pill packaging machine with a newer model. Use the financial statements to calculate the ROA and any other necessary information. Use the investment worksheet and the attached financial statements to complete the capital budgeting worksheet. a. Using the most current year, what is the division's ROA? Investment: Pill packaging machine Old Machine (Model A11) $75,000 8 years $15,000 $37,500 $45,000 O Purchase Price Estimated Useful Life Disposal (Salvage) Value Accumulated Depreciation Market Value of machine Installation costs Yearly Operating Cash Flow Yearly New Product Revenue Cash Flow (enabled by new machine capabilities) New Product COGS Cash Flow Yearly Maintenance Cash Flow Machine Overhaul (end of year 5) Other data The division's required rate of return is 12%. The division's tax rate is 30%. • Sales tax on new machine is 5% $45,000 II $16,000 $6,000 New Machine (Model A15) $70,000 10 years $10,000 $20,000 $32,000 $45,000 $30,000 $19,500 $8,000 What is the NPV of the equipment replacement decision including any working capital requirements? Complete the Capital Budgeting Worksheet. D Capital Budgeting Worksheet Capital Budgeting Proposal # (Net) NPV Decision Metrics 1. What is the investment's Payback? 2. What is the investment's ROI? 3. What is the investment's IRR? 4. What is the investment's Simple Rate of Return? 5. What is the investment's Profitability Index? (Thousands) Net Sales Cost of Sales Cost of Goods Sold Gross Income Selling, general and Administrative Net Operating Income (NOI) Other Income & Expenses Extraordinary Gain (Loss) Interest Expense Net Profit Before Taxes Income Taxes Net Income 2017 (Year ended December 31) 2018 $8,000,000 $7,000,000 5,500,000 4,800,000 2,500,000 2,200,000 2,050,000 1,275,000 450,000 925,000 200,000 75,000 100,000 850,000 255,000 $595,000 $1,155,000 1,650,000 495,000 Balance Sheet (Thousands) Assets Current Assets Cash Receivables Inventories Raw Material Work-in-Process (WIP) Finished Goods (Year ended December 31) Total Inventory Other Current Assets Property Plant & Equipment Land & improvements, buildings Machinery & Equipment Less Accumulated depreciation Other Assets Total Assets Liabilities and Shareholder Equity Current Liabilities Accounts Payable Accrued compensation Other Current Liabilities Long Term Debt Deferred liabilities Other long-term liabilities Common shareholder's equity Common stock Additional paid-in capital Retained earnings 300,000 200,000 330,000 I 2020 $ 125,000 1,450,000 830,000 1,350,000 3,755,000 320,000 700,000 (350,000) 670,000 175,000 845,000 $4,600,000 400,000 100,000 200,000 700,000 600,000 160,000 150,000 900,000 500,000 1,590,000 $4,600,000 250,000 180,000 250,000 $ 2019 200,000 1,000,000 680,000 1,200,000 3,080,000 300,000 675,000 (340,000) 635,000 150,000 785,000 $3,865,000 300,000 90,000 150,000 540,000 200,000 100,000 35,000 900,000 1,000,000 1,090,000 $3,865,000 You have been asked to evaluate an investment to replace an old pill packaging machine with a newer model. Use the financial statements to calculate the ROA and any other necessary information. Use the investment worksheet and the attached financial statements to complete the capital budgeting worksheet. a. Using the most current year, what is the division's ROA? Investment: Pill packaging machine Old Machine (Model A11) $75,000 8 years $15,000 $37,500 $45,000 O Purchase Price Estimated Useful Life Disposal (Salvage) Value Accumulated Depreciation Market Value of machine Installation costs Yearly Operating Cash Flow Yearly New Product Revenue Cash Flow (enabled by new machine capabilities) New Product COGS Cash Flow Yearly Maintenance Cash Flow Machine Overhaul (end of year 5) Other data The division's required rate of return is 12%. The division's tax rate is 30%. • Sales tax on new machine is 5% $45,000 II $16,000 $6,000 New Machine (Model A15) $70,000 10 years $10,000 $20,000 $32,000 $45,000 $30,000 $19,500 $8,000 What is the NPV of the equipment replacement decision including any working capital requirements? Complete the Capital Budgeting Worksheet. D Capital Budgeting Worksheet Capital Budgeting Proposal # (Net) NPV Decision Metrics 1. What is the investment's Payback? 2. What is the investment's ROI? 3. What is the investment's IRR? 4. What is the investment's Simple Rate of Return? 5. What is the investment's Profitability Index?

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