2. Using this data below, construct an income statement. Last year Sun Skateboards had $200,000 in revenues. The company had $70,000 in COGS and $30,000 is SG&A (Operating Expenses). It was in the 40% corporate tax rate. They had depreciation expense of $35,000 and interest expense of $20,000.
3. Last year Sun Skateboards had $80,000 in current assets (20%cash, 30% accounts receivable, 40% inventory and 10% pre-paid expenses); $47,000 in current liabilities and $25,000 in long term debt. It had $61,000 in fixed assets. Determine the amount of shareholder’s equity and construct a balance sheet for Sun Skateboards.
4. Last year, Sun Skateboards had $50,000 in operating cash flow, $45,000 in financing cash flow and $30,000 in investing cash flow. Paid $44,000 to employees, $15,000 for rent, $5000 for utilities, $15,000 in dividends, Generate a statement of cash flows for Sun Skateboards.
5. Time Value of Money---- Future values/compound interest/present values
1. What is the future value of $10 invested at 10% at the end of 1 year
2. What is the future value of $10 invested at 10% at the end of 5 year?
3. Net Present Value ( NPV) Scenario:-- NPV is the Present value of incoming money minus initial investment. For a project to be profitable, NPV has to be positive. Let us apply this concept to the following situation:
You own a Pizza Restaurant and you need to expand your cooking capacity to meet demand. You need a new oven which will cost $100,000. Your current oven costs $15,000 a year to operate and you expect to save $5,000 a year operating this new oven. The anticipated life of the oven is 10 years and it will be worth $0 at the end of that period. Your current tax rate is 30%. It would also generate additional profit after taxes as follows: Y1 $7,500, Y2 to Y7 $10,000, Y8 to Y10 $12,000.
What is the NPV of this project? Should you buy the oven? Assume 10% interest rate.
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