Kids are Active is a trampoline rental business in Imagination Alberta (I am making this up). As many parents shy away from buying a bulky trampoline that then spend winters sitting outside and rotting away, Kids are Active offers urban parents yearly rentals including spring assembly and fall take-down.

Looking at growing interest for their business model Kids are Active needs to first raise the capital needed to buy trampolines on order to start their operations. Now, their business advisor asked them to gather key financial indicators as part of their financial (business) plan prior to talking to potential investors. Kids are Actives estimated cost and revenue information are as follows:

Revenues:

Kids are Active wants to offer trampoline rentals at a competitive rental price of $400 per year for the first year. Rental rates then decrease by $20 every year thereafter. The plan to offer a total of 200 rental trampolines to begin with.

Capital costs (in year 0):

Class 6: Building and shop equipment (commercial bay): Class 8: Equipment without motors (transport trailer, etc.):

Sports equipment used in business (trampolines):

Class 10: Machinery with motors (power washer, transport truck):

Other Costs:

$20,000 $5,000 $80,000 $30,000

Salary cost for their on-site installer (supervisor) and one seasonal employee (including benefits) are estimated at $50,000 per year.

Marketing and operating expenses including fuel, internet, insurance, utilities, advertisement, etc. should add up to another $5,000 a year.

Salvage value:

Kids are Active assumes the salvage value of their capital assets to be equal to the sum of the ending balances of their three Capital Cost Allowance (CCA) categories in year 5.

Initial Calculations (35 points)

Conduct all calculations in Excel (or Google Sheets) as part of your submission! Consult eclass handouts and lecture notes for guidance.

1. Calculate the net revenue for first 5 years (5 points).

2. Calculate the amount of CCA expenses for the first 5 years (10 points):

3. Calculate taxable income for first 5 years (5 points):

4. Given the corporate tax rate of 11% (9% Fed, 2% AB), how much tax does Kids are

   Active have to pay in years 1 to 5 (5 points)?

5. Whats Kids are Active Net Income after Tax in years 1 to (5 points)?

6. Calculate Kids are Active Net Cash Flow for years 1 to 5 (5 points).

7. Use the below templates to summarize the result of your calculations. Submit your Excel

   (Google) spreadsheet and below tables as part of your assignment (5points).

   Year 12345 Revenue Cost Net Revenue

   CCA Taxable Income Tax Net Income After Tax Net Cash Flow

   CCA calculations Year 12345 Class -- (--%) Beginning Balance - Additions CCA Ending Balance Class -- (--%) Beginning Balance - Additions CCA Ending Balance Class -- (--%) Beginning Balance - Additions CCA Ending Balance Total CCA