Complete the cash flow statement on the Excel worksheet and submit your answers.

● Kyunggong Co., Ltd. is a company that manufactures and sells medical devices. The company was established 14 years ago and is doing quite well, but at the time of its establishment, it has rented offices and necessary equipment due to a lack of capital. The board of directors consists of six co-owners, who are interested in long-term income growth rather than short-term income, so past income was mainly used to purchase necessary equipment, buildings or land. Currently, most of the company's products have relatively short lives because of the fierce competition for the development and quality of devices used for hospitals and health care. Therefore, the company uses versatile machines and has competent product development personnel.

● The board of directors estimated the capital investment amount of KRW 100 million for next year and instructed each department to submit an investment plan. The Board also designated a minimum required return (MARR) of 12 per cent after tax. The company's taxable income this year is 200 million won and its corporate tax rate is 25 percent. In investment projects that include facility investment, working capital is about 20% of the business's first-year sales.

● Since the company does not have enough capital, I asked the accounting manager to report the external financing, and the bank said that he can borrow up to 200 million won at an annual interest rate of 10%. Provided, That the terms of the loan are to repay the same amount at the end of each year for five years, including principal and interest. For all investments, 50% of the initial capital investment will be covered by the bank's borrowing and the rest by equity.

● When I visited the equipment rental company, I heard that it is possible to rent equipment necessary for construction. The terms of the equipment lease are to pay 15% of the purchase price as a deposit (return if the equipment is in good condition after the lease) and pay 1.7 times the depreciation of the year at the end of each year. The purchase price, residual value, durability, etc. are said to be the same as estimated by Kyunggong Co., Ltd.

● Three investment proposals for this company have been submitted.
1. Most of the company's products need to be plated with chromium, gold, silver, etc., but now they are subcontracted to external plating companies. However there are many disruptions in production as quality of plating is not uniform or delivery date is often broken. According to the production manager's report, the company will spend 32 million won this year on subcontracting and the cost will increase by 2 million won every year in the future. If the company does plating facilities, it will purchase equipment with 35 million won and cost 20 million won for the first time as operating expenses (insurance, property tax, electricity, materials, labor, etc.). In the case of self-plating, the quality of the plating or the delay in the delivery date is improved. The annual operating costs will increase by 1.2 million won per year, with the number of years of use of the equipment being 10 years and the disposal value of the equipment being 2 million won. Depreciation would apply the flat rate method (10 years, 10% of the purchase price for the residual price).

2. Currently, the company's office leases and uses a two-story building next to the manufacturing plant. The lease is valid for the next five years and pays 18 million won at the end of each year in rent. The manager in charge of leasing said that the annual rent will be 28 million won five years after the current contract ends, and when he met with the owner of the building and sounded out his intention to sell it, he offered 150 million won (155 million won for building and 45 million won for land). The building is 25 years old, and if purchased, the building will depreciate for 15 years with no residual value and land prices will receive 100 million won in 15 years.

3. The head of the production machinery department believes that it is desirable to sell some of the general-purpose manual machines and buy modern semi-automatic machines among the company-owned machines in terms of reducing the high labor costs of skilled mechanics. The plan calls for disposing of three machines purchased and used for 15 million won each 10 years ago for 2 million won and buying 87 million won machines with a 10-year lifespan. The book price of three older machines is zero. The new machine will be depreciated under the flat rate method (10 years, 10% of the purchase price), and the disposal value is expected to be KRW 10 million in 10 years. In addition, the purchase of the machine is expected to save 20 million won a year.

Design Challenges
1. Instead of subcontracting plating outside for the next 10 years, purchase plating equipment from Kyunggong Co., Ltd. and make a decision on the purchase of plating equipment after taxing the annual equivalent. If you purchase plating equipment, reduce the cost of subcontracting outside, so make an income statement and a statement of cash flows by recognizing this amount as sales. Find net present value, annual equivalent return on real investment.

2. If you rent a building for the next 15 years, find the annual equivalent after tax.

3. Find the annual equivalent after tax when purchasing a building. However, the value of the building after 15 years is zero. Is the purchase of a building legitimate? Find net present value and annual equivalence.

4. Real estate purchase funds can be financed by a bank loan. The terms of borrowing shall be repaid equally for ten years and the interest shall be calculated at the end of each year at 13%. Find net present value and annual equivalence.

5. Find the post-tax annual equivalent for the purchase of the semi-automatic machine mentioned in subsection 3. There is no additional working capital.

6. If you rent a semi-automatic machine, find the annual equivalent after tax. There is no additional working capital.

7. The board of directors decided to consider the lease plan for plating equipment. Find the post-tax annual equivalent of renting plating equipment.