MGT 325 Module 6 Spreadsheet Exam Part A, B & C - MONARCH CORPORATION

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.