Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Martin Enterprises needs someone to supply it with 1 2 9 , 0 0 0 cartons of machine screws per year to support its manufacturing

Martin Enterprises needs someone to supply it with 129,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $930,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero salvage value over the project's life. You estimate that, in five years, this equipment could be worth $97,000(before taxes). Your fixed production costs will be $505,000 per year, and your variable production costs should be $17.75 per carton. You also need an initial investment in net working capital of $98,000.
Assume your tax rate is 24 percent and you require a return (discounting rate) of 10 percent on your investment.
Assuming that the price per carton is $26.80, prepare a pro forma income statement.
\table[[,Annual Net Income],[Sales,],[Variable costs,],[Fixed costs,],[Depreciation,],[EBIT,],[Taxes (24%),],[Net Income,]]
What is the operating cash flow (OCF)?
Page 1 of 2
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance Administration

Authors: B. J. Reed, John W. Swain

2nd Edition

0803974051, 978-0803974050

More Books

Students also viewed these Finance questions

Question

Describe the rationale behind short-selling.

Answered: 1 week ago