You are the owner of a small business. An opportunity to expand into a new market...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are the owner of a small business. An opportunity to expand into a new market niche arose. It requires an initial equipment investment of $400,000. You will finance the entire amount with a 5-year loan at 5% interest rate (annual payments). Depreciation will follow MACRS-3 Sales projections look very promising as shown below: $200,000 in first year's projected sales Sales growth is expected to increase by 50% over the previous year's sales • COGS is expected to remain at 30% of each years' sales • Operating Expenses are $10,000 the first year and increase by 50% over the previous year's Operating Expense. Business ordinary tax rate is 25% A. Develop the following for years 1 thru 5: 1. Loan amortization table (2 points) 2. Depreciation table (2 points) 3. Income Statement (3 points) 4. Cash Flow Statement (3 points) B. Based on the information provided in the above statements, would you pursue the opportunity? In -50 words, explain why or why not. (2 BONUS points) (Note: your assessment must be rational & reasonable and your explanation should be supported by facts within the statements to earn the extra credit) You are the owner of a small business. An opportunity to expand into a new market niche arose. It requires an initial equipment investment of $400,000. You will finance the entire amount with a 5-year loan at 5% interest rate (annual payments). Depreciation will follow MACRS-3 Sales projections look very promising as shown below: $200,000 in first year's projected sales Sales growth is expected to increase by 50% over the previous year's sales • COGS is expected to remain at 30% of each years' sales • Operating Expenses are $10,000 the first year and increase by 50% over the previous year's Operating Expense. Business ordinary tax rate is 25% A. Develop the following for years 1 thru 5: 1. Loan amortization table (2 points) 2. Depreciation table (2 points) 3. Income Statement (3 points) 4. Cash Flow Statement (3 points) B. Based on the information provided in the above statements, would you pursue the opportunity? In -50 words, explain why or why not. (2 BONUS points) (Note: your assessment must be rational & reasonable and your explanation should be supported by facts within the statements to earn the extra credit)
Expert Answer:
Answer rating: 100% (QA)
Loan Ammrotisation table YEAR 1 INTEREST PAYMENT PRINCIPAL PAYMENT BALANCE 1 2000000 7238992 3276100... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Investigate the type of quadrilateral formed by connecting the midpoints of a general quadrilateral. Prove your conjecture in two ways, using (1) synthetic methods and (2) analytic methods
-
You are the owner of a small movie-rental store run by a full-time manager. Required: (a) Develop a brief mission statement for your business. (b) Prepare a balanced scorecard for the manager,...
-
You are the owner of a small hard ware store, and you are considering opening a gardening store in a vacant area in the back of your present store. You estimate that it will cost you $50,000 to set...
-
On the income statement for the year ending December 31, Y1, the accountant for ABC calculated operating income before taxes of $300,000. This $300,000 did not include the effect of any of the...
-
Why are the process temperatures for canning low-acid foods higher then ones for acidic foods?
-
H Ltd. acquired 4,000 Equity Shares of S Ltd. on 1.1.2015. Their Balance Sheets as at 31.12.2015 were as follows: On 1.1.2015, the Profit and Loss Account of S Ltd. showed a credit balance of ...
-
The gas entering a rocket nozzle has a stagnation pressure of \(1500 \mathrm{kPa}\) and a stagnation temperature of \(3000^{\circ} \mathrm{C}\). The rocket is traveling in the still Standard...
-
Did any of the parties involved in this case commit an ethical violation? Discuss. Thomas Bracken (owner of 1513 North Wells, LLC), Mark Sutherland, and Alex Pearsall were limited partners in 1515...
-
A passenger is on an airplane that is traveling 30 south of due west at 130m/s with respect to the air. The air is moving with a speed of36.0m/s with respect to the ground duenorth. Macmillan...
-
New Age Solar sells and installs solar panels for residential homes. The companys sales representatives contact and pay a personal visit to potential customers to present the benefits of installing...
-
On May 15th a company rented out part of their storage facility to another company for $150,000. The rental agreement was only for four months while the other company completed construction of their...
-
The additional yield on a bond that investors require for bearing default risk is known as Blank______.
-
2. Identify at least three convenience products you could use when preparing stocks, sauces and soups.
-
What may patients request under HIPAA and HITECH in regard to disclosures? Explain briefly
-
How Close Revenues out to a temporary income summary account? How Close Assets out to a temporary income summary account effect on company's income?
-
Discuss the process of identifying which technologies are most important for an organization.
-
A company is considering a project. It has only 10% debt in its capital structure, with a pre-tax cost of 8%. It has a beta of 1.4; the risk free rate is 5%, and the equity risk premium is 6.5%. The...
-
Does log 81 (2401) = log 3 (7)? Verify the claim algebraically.
-
What can an investor learn from looking at the relationship between operating, nancing, and investing cash ows from year to year?
-
The nancial statements of a company are prepared before the closing entries. Required: Use the annual report of Carnival Corporation for the 2007 scal year to answer the following questions....
-
Does the FIFO or LIFO inventory costing method generally provide the more appropriate method for balance sheet valuation purposes? Which method provides a more appropriate valuation for income...
-
What would be the most effective option to increase employee motivation to stay and reduce the driver turnover rate? Why do you believe this option will be effective?
-
How else might the manager have handled the situation to prevent potential issues, including a negative impact on the teams performance?
-
In what ways do you believe providing special work arrangements or accommodations for employees impacts employee motivation? How does it help? How does it hurt?
Study smarter with the SolutionInn App