Answer to part B please, preferably in excel
ABC Company has asked you to not only prepare their 2017 year-end Balance Sheet but to also provide pro-forrma financial statements for 2018. In addition, they have asked you to evaluate their company based on the pro-forma statements with regard to ratios. They also want you to evaluate 3 projects they are considering. Their information is as follows: End of the year information: 12/31/17 Account Ending Balance Cash 50,000 Accounts Receivable 175,000 Inventory Equipment Accumulated Depreciation Accounts Payable Short-term Notes Payable 126,000 480,000 90,000 156,000 12,000 Long-term Notes Payable Common Stock 200,000 235,000 Retained Earnings solve Additional Information: Sales for December total 10,000 units. Each month's sales are expected to exceed the prior month's results by 5 %. The product's selling price is $25 per unit. Company policy calls for a given month's ending inventory to equal 80% of the next month's expected unit sales. The December 31 2017 inventory is 8,400 units, which complies with the policy. The purchase price is $15 per unit. 12.5% of sales and are paid in the month of the Sales representatives' commissions are sales. The sales manager's monthly salary will be $3,500 in January and $4,000 per month thereafter. Monthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in t month of sale). credit, and no payables arise from any other All merchandise purchases are on transactions. One month's purchases are fully paid in the next month. The minimum ending cash balance for all months is $50,000. If necessary, the compas borrows enough cash using a short-term note to reach the minimum. Short-term nos require ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance. interest payment of 1% at each month-end (before any repayment). If the an Dividends of $100,000 are to be declared and paid in February. No cash payments for income taxes are to be made during the first calendar quarter. Income taxes will be assessed at 35% in the quarter. Equipment purchases of $55,000 are scheduled for March. Part B: Calculate using Excel formulas, the NPV of each of the 3 projects It is possible that ABC Company may not be able to complete all 3 projects. Therefore advise ABC Company which project should ABC Company attempt to do first, second, and last). as to the order in which they should pursue the projects (i.e., Provide justification and analysis as to why you chose the order you did. The analysis must also be done in Excel, not in a separate document. ABC Company's management is also considering 3 new projects consisting of the purchase of new equipment. The company has limited resources, and may not be able to complete make all 3 purchases. The information is as follows for the purchases below. Project 1 Project 2 Project 3 Purchase Price $80,000 $22,700 $175,000 Required Rate of Return 6% 8% 12% 5 years 2 years Time Period 3 years $13,000 $85,000 $48,000 Cash Flows - Year 1 $13,000 $74,000 $36,000 Cash Flows-Year 2 N/A $38,000 Cash Flows-Year 3 $22,000 N/A $26,800 N/A Cash Flows- Year 4 N/A $19,000 N/A Cash Flows-Year 5
