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If a proposed new investment is undertaken by the DEL Company, it is expected to produce projected sales in year 5 of $1,650,000. Variable costs

If a proposed new investment is undertaken by the DEL Company, it is expected to produce projected sales in year 5 of $1,650,000. Variable costs are 60 per cent of sales, and costs are $300,000. Depreciation for the year will be $175,000. Prepare a projected Income Statement assuming a 30 per cent tax rate.

(6 Marks)

B4. b Assume the sales and costs other than depreciation are cash. What cash flow would be included in a capital investment analysis?

(3 Marks)

B4. c Why is the answer to (b) different from the answer in (a)?

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