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Can I have some help on two problems. They involve Net Present Value and Incremental Analysis. Problems: 1) Net Present Value: The Goldman's are considering

Can I have some help on two problems. They involve Net Present Value and Incremental Analysis.

image text in transcribed Problems: 1) Net Present Value: The Goldman's are considering adding a new piece of equipment that will speed up the process of building bobble heads. The cost of the piece of equipment is $42000. It is expected that the new piece of equipment will lead to cash flows of $17000, $29000, and $40000 over the next 3 years. If the appropriate discount rate is 12%, what is the NPV of this investment? Explain the findings. 2) Incremental Analysis: If production does increase dramatically after their presentation on Shark Tank, the Goldman's will need more space for production. They have two options. Option 1 is to rent out a spacious warehouse nearby. If they pursue this option, there rent will be $1200 per month and utilities are estimated to cost an additional $350 per month. Their second option, Option 2, is to rent a smaller storefront space that is also nearby. The storefront rent is $1350 per month. However, utilities will likely only cost an additional $150 per month. They want to compare their options over one year's time (since each rental contract is a 1 year commitment). What is the incremental analysis if the Lees choose Option 1 over Option 2? Income Statement Data: Units produced and sold = 420 Sales ($80 per unit selling price) = $33600 Cost of goods sold ($30 per unit, all variable costs) = $12600 Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves) Advertising fees =$2000 Bank fees = $150 Phone/internet = $1200 Shipping ($3 per unit) = $1260 Utilities = $900 Office supplies = $800 Interest expense on note payable = $350 Depreciation expense (straight line) = $800 Income tax rate = 26 % Other Financial Data for 20XX: Proceeds from sale of equipment = $3000. The equipment originally cost $1000 and had accumulated depreciation of $200. Purchase of equipment = $1600 (The machine is purchased on the last day of 20XX so no depreciation expense is recorded.) Repayment of note payable = $5000 Consider any data relevant from the income statement. Balance Sheet Data for Beginning of 20XX: Cash and cash equivalents = $10000 Accounts receivable = $0 (Cash is received at time of sale) Raw materials inventory = $10500 Equipment = $5000 (This includes the $1000 cost of the equipment sold in 20XX). Accumulated depreciation = $1,000 (This includes the accumulated depreciation of 200 for the equipment sold in 20XX. Accounts payable = $0 (Cash is paid at the time of purchase.) Note payable = $5000 (This is the note payable which is repaid in 20XX) Common stock = $15000 Retained earnings = $4500

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