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X Problem 10.LO2.6 (similar to) 3 Question Help Ken Smith wants to start a deck and fence company called Heritage Design. Ken will run the
X Problem 10.LO2.6 (similar to) 3 Question Help Ken Smith wants to start a deck and fence company called Heritage Design. Ken will run the business for three years and then retire. Assume that his investment outlays will occur immediately, and all operating cash flows occur at year-end the first year's cash flows occurring one year from now. Ken plans to buy two pick-up trucks at a cost of $25.800 per vehicle. He also expects to purchase $20,900 worth of tools and equipment. The trucks and equipment are in Class 43 with 30% depreciation rate. Ken is forecasting that he will build 100 decks in the first year and 130 decks in years 2 and 3. He anticipates that the average deck will be priced at $5,450. Ken estimates that the cost of lumber for the typical deck is $1,950. Ken will rent an office and a garage. Rent, office expenses, and vehicle expenses are expected to be $56,000 per year. Ken will hire a salesman, a receptionist bookkeeper and two installers to help with deck construction. Total wag and salaries are expected to be $295,000 per year. The corporate tax rate is 30%. Complete parts a through c below. Input your answers in the units indicated, but do not use the rounded values in your calculations. Instead, in your intermec calculations, you should carry as many significant figures as necessary to make your final answer accurate to pennies. a. What is the total initial investment? The total initial investment is $ 72500. (Round to the nearest dollar.) b. What are the depreciation expenses in each of the three years of the project? (Round to the nearest dollar.) The depreciation expense in Year 1 is S 10875. The depreciation expense in Year 2 is S 18487.5. The depreciation expense in Year 3 is $ 12941.25. c. What are the operating cash flows in each of the three years of the project? (Round to the nearest dollar.) The operating cash flow in Year 1 is $ . The operating cash flow in Year 2 is $ . The operating cash flow in Year 3 is $ . Enter your answer in the edit fields and then click Check
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