Mika founded a packaged beverage company in early 2022. Based on information gathered from consumers, mika plans to increase sales of packaged drinks in 2023, by producing packaged drinks with new flavors. Revenue in 2022 is $500,000 and is expected to reach $1,500,000 in 2023. Each bottled beverage will sell for $5, and the bottled beverage costs $2 per bottle to produce. Administrative costs including mika entrepreneur’s salary, salary of one accountant and three clerks, are estimated at $200,000 and marketing costs such as posters, advertisements in local newspapers, are estimated at $350,000 in 2023. Then, investment in special equipment and renovation of Warehouses accounts for $562,500 and $62,500 in inventory, which was done in 2022. Moreover, an additional $150,000 in equipment investment is expected to be needed in early 2023 to increase the production volume of their bottled beverage. Currently, the old machine is still capable of producing the targeted amount of bottled drinks, it’s just that the machine has to work for 24 hours a day. Machinery depreciation costs are expected to be $75,000 and interest expenses are expected to be $18,000 in 2023. The tax rate is expected to be 25 percent of taxable income.

How much net profit, before any financing costs, is the venture expected to earn in 2023? What would be the net profit if sales reach $2,5 million?

How much net profit, after any financing costs, is the venture expected to earn in 2023?

Answer rating: 100% (QA)

To calculate the net profit before any financing costs for the venture in 2023 we need to subtract a... View the full answer