MGT 325 - Module 6 Spreadsheet Exam

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MGT 325 Module 6 Spreadsheet Exam  Part A       
        
COMPREHENSIVE CHAPTER 12 & 13 PROBLEMS        
MONARCH CORPORATION IS GOING TO START A NEW PRODUCT LINE OF PRODUCTS IN A WHOLE NEW MARKET.        
THE DATA FOR ANALYSIS IS PRESENTED BELOW:        
        
COST OF THE EQUIPMENT NEEDED   $194,000  FIVE YEAR PROPERTY FOR TAX DEPRECIATION     
NEW WORKING CAPITAL NEEDS   $50,000  WILL BE RECOVERED AT THE END OF THE THIRD YEAR     
PROJECTED NEW REVENUES:        
SALES  PROBABILITY        
 $200,000  30%       
 $250,000  50%       
 $300,000  20%       
COST OF GOOD SOLD  30% OF SALES     
VARIABLE CASH COSTS  10% OF SALES     
ANNUAL FIXED CASH COSTS:        
   RENT  $50,000        
   CLEANING  $20,000        
   MAINTENANCE & OTHER  $10,000        
      TOTAL FIXED COSTS  $80,000        
EQUIPMENT DISPOSAL PROCEEDS   $19,400  SALVAGE VALUE AT THE END OF YEAR 6     
FIRM'S COST OF CAPITAL  12.00%      
TAX RATE  35%      
NOTE - WHEN COMPUTING TAX, A NET LOSS FOR THE YEAR MEANS A POSITIVE TAX SAVINGS IS CREATED        
            SINCE THERE IS OTHER INCOME TAX ON OTHER INCOME TO OFFSET.        
DEPRECIATION RATES FOR TAX PURPOSES:        
      YEAR ONE  20.00%      
      YEAR TWO  32.00%      
      YEAR THREE  19.20%      
      YEAR FOUR  11.50%      
      YEAR FIVE  11.50%      
      YEAR SIX  5.80%      
ASSUMPTIONS:        
ALL CASH FLOWS IN YEARS 1-6 OCCUR AT THE END OF THE YEAR.  ALL INITIAL CASH INFLOWS OR        
OUTFLOWS OCCUR TODAY.        
        
REQUIRED:        
A.   ASSUMING SALES ARE $200,000 COMPUTE THE PAYBACK, IRR AND NPV.  FOR THE NPV, COMPUTE        
      AT BOTH THE FIRM'S DISCOUNT RATE AND 16%, WHICH IS A 4% PREMIUM ADDED TO THE RATE.        
B.   COPY THE WHOLE WORKSHEET AND SOLUTIONS FOR PART A TO THE WORKSHEET NAMED PART B,         
      AND REDO THE COMPUTATIONS BY CHANGING THE ANNUAL SALES TO $250,000.        
C.   COPY THE WHOLE WORKSHEET AND SOLUTIONS FOR PART A TO THE WORKSHEET NAMED PART C,         
      AND REDO THE COMPUTATIONS BY CHANGING THE ANNUAL SALES TO $300,000.        

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