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(A) (B) (C) (D) Year 1 2 3 4 5

The document contains tables showing the depreciation of an asset over 5 years using the declining balance method at a rate of 20% per year. It also contains income statements for 5 years showing revenues of $250,000 per year, variable costs of 10% of revenues, fixed costs of $900,000, and depreciation expense based on the declining balance method. The net present value of the 5 years of cash flows is calculated to be -$61,812 using a 13% discount rate. Scenarios are presented lowering sales to $200,000 and lowering variable costs from 2.5% to 1.5%, showing the impact on earnings before tax and net present value.

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Gonçalo Almeida
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23 views8 pages

(A) (B) (C) (D) Year 1 2 3 4 5

The document contains tables showing the depreciation of an asset over 5 years using the declining balance method at a rate of 20% per year. It also contains income statements for 5 years showing revenues of $250,000 per year, variable costs of 10% of revenues, fixed costs of $900,000, and depreciation expense based on the declining balance method. The net present value of the 5 years of cash flows is calculated to be -$61,812 using a 13% discount rate. Scenarios are presented lowering sales to $200,000 and lowering variable costs from 2.5% to 1.5%, showing the impact on earnings before tax and net present value.

Uploaded by

Gonçalo Almeida
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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(a) (b) (c) (d)

Year Starting Value Depreciation Accumulated Residual


20% Depreciation Value
20% (a)-(b)
1 3,200,000 640,000 640,000 2,560,000
2 2,560,000 512,000 1,152,000 2,048,000
3 2,048,000 409,600 1,561,600 1,638,400
4 1,638,400 327,680 1,889,280 1,310,720
5 1,310,720 1,310,720 3,200,000 0

Variable
Sales Revenues Fixed Costs Dep. 20% EBT
Costs
205,333 10 2.5 900,000
0
1 205,333 2,053,333 513,333 900,000 640,000 0
2 205,333 2,053,333 513,333 900,000 512,000 128,000
3 205,333 2,053,333 513,333 900,000 409,600 230,400
4 205,333 2,053,333 513,333 900,000 327,680 312,320
5 205,333 2,053,333 513,333 900,000 1,310,720 -670,720
Tax Net Income

23%

0 0
29,440 98,560
52,992 177,408
71,834 240,486
-154,266 -516,454
Cum. Net
Profit 0
(a) (b) (c) (d)

Year Starting Value Depreciation Accumulated Residual


20% Depreciation Value
20% (a)-(b)
1 3,200,000 640,000 640,000 2,560,000
2 2,560,000 512,000 1,152,000 2,048,000
3 2,048,000 409,600 1,561,600 1,638,400
4 1,638,400 327,680 1,889,280 1,310,720
5 1,310,720 1,310,720 3,200,000 0

Variable
Sales Revenues Fixed Costs Dep. 20% EBT
Costs
250,000 10 2.5 900,000
0
1 250,000 2,500,000 625,000 900,000 640,000 335,000
2 250,000 2,500,000 625,000 900,000 512,000 463,000
3 250,000 2,500,000 625,000 900,000 409,600 565,400
4 250,000 2,500,000 625,000 900,000 327,680 647,320
5 250,000 2,500,000 625,000 900,000 1,310,720 -335,720

Net income Depreciation OCF Investment Net Cash flow PV Cash flow

0 -3,200,000 -3,200,000 -3,200,000


1 257,950 640,000 897,950 897,950 794,646
2 356,510 512,000 868,510 868,510 680,171
3 435,358 409,600 844,958 844,958 585,598
4 498,436 327,680 826,116 826,116 506,673
5 -258,504 1,310,720 1,052,216 1,052,216 571,100
NPV -61,812
Tax Net Income

23%

77,050 257,950
106,490 356,510
130,042 435,358
148,884 498,436
-77,216 -258,504

13% required rate of return


Scenario Summary
Current Values:Lower sales
Changing Cells:
$B$13 250,000 200,000
Result Cells:
$G$30 -61,812 -1,077,412 20.3120105
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.
(a) (b) (c) (d)

Year Starting Value Depreciation Accumulated Residual


20% Depreciation Value
20% (a)-(b)
1 3,200,000 640,000 640,000 2,560,000
2 2,560,000 512,000 1,152,000 2,048,000
3 2,048,000 409,600 1,561,600 1,638,400
4 1,638,400 327,680 1,889,280 1,310,720
5 1,310,720 1,310,720 3,200,000 0

Variable
Sales Revenues Fixed Costs Dep. 20% EBT
Costs
250,000 10 2.5 900,000
0
1 250,000 2,500,000 625,000 900,000 640,000 335,000
2 250,000 2,500,000 625,000 900,000 512,000 463,000
3 250,000 2,500,000 625,000 900,000 409,600 565,400
4 250,000 2,500,000 625,000 900,000 327,680 647,320
5 250,000 2,500,000 625,000 900,000 1,310,720 -335,720

Net income Depreciation OCF


0
1 257,950 640,000 897,950
2 356,510 512,000 868,510
3 435,358 409,600 844,958
4 498,436 327,680 826,116
5 -258,504 1,310,720 1,052,216
Tax Net Income

23%

77,050 257,950
106,490 356,510
130,042 435,358
148,884 498,436
-77,216 -258,504

13% required rate of return


Scenario Summary
Current ValueVariabel costs
Changing Cells:
$D$13 2.5 1.5
Result Cells:
$D$24 897,950 1,090,450 -192500
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.

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