You have a full-time job but want to bake and sell cupcakes on evenings and weekends. You live in an apartment, so you will need to rent a bakery space and spend some money up front for special equipment. You want to know if this idea is worth pursuing. You estimate the following items related to the project (hint: this table can be copied into an Excel file) Cupcake bakery project description Project life (years) Required retum Sales information Unit sales (anal) 8,500 Unit price S260 Cost information $1.05 Bakery rent (annual) $12,000 Equipment cost (one-time purchase) After-tax equipment salvage (Year 3) Depreciation expense (annual) Tax rate Year Ototal capital spending equipment Change in net working capital 5900 s0 Straight line method 21% $900 Year 0 -$1.500 Year 1 Year 2 Year 3 SO $1,500 (recovery) * This is the federal corporate tax rate Delicious Cupcakes has decided to locate in Washington There is no state corporate tax. It will have to pay gross receipts tax, which you will not include in this analysis. 1. Prepare pro forma income statements for three years 2. Prepare pro forma cash flows from assets (free cash flow) for three years 3. Calculate the project's NPV 4. Calculate the project's IRR 5. Insert a text box in your spreadsheet. In it, state whether you should pursue this project, and briefly explain your rationale Itemization for Income statement and free cash flows are provided below. Income statement Sales Total project free cash flow Operating cash flowEBIT depreciation - tax expense Change in networking capital (NWO) Capital spending Cost of goods sold Gross Profit Fixed Costs Depreciation EBIT-Gross profit-fixed costs-depreciation Tax Expense EBIT tax rate Net Income You have a full-time job but want to bake and sell cupcakes on evenings and weekends. You live in an apartment, so you will need to rent a bakery space and spend some money up front for special equipment. You want to know if this idea is worth pursuing. You estimate the following items related to the project (hint: this table can be copied into an Excel file) Cupcake bakery project description Project life (years) Required retum Sales information Unit sales (anal) 8,500 Unit price S260 Cost information $1.05 Bakery rent (annual) $12,000 Equipment cost (one-time purchase) After-tax equipment salvage (Year 3) Depreciation expense (annual) Tax rate Year Ototal capital spending equipment Change in net working capital 5900 s0 Straight line method 21% $900 Year 0 -$1.500 Year 1 Year 2 Year 3 SO $1,500 (recovery) * This is the federal corporate tax rate Delicious Cupcakes has decided to locate in Washington There is no state corporate tax. It will have to pay gross receipts tax, which you will not include in this analysis. 1. Prepare pro forma income statements for three years 2. Prepare pro forma cash flows from assets (free cash flow) for three years 3. Calculate the project's NPV 4. Calculate the project's IRR 5. Insert a text box in your spreadsheet. In it, state whether you should pursue this project, and briefly explain your rationale Itemization for Income statement and free cash flows are provided below. Income statement Sales Total project free cash flow Operating cash flowEBIT depreciation - tax expense Change in networking capital (NWO) Capital spending Cost of goods sold Gross Profit Fixed Costs Depreciation EBIT-Gross profit-fixed costs-depreciation Tax Expense EBIT tax rate Net Income You have a full-time job but want to bake and sell cupcakes on evenings and weekends. You live in an apartment, so you will need to rent a bakery space and spend some money up front for special equipment. You want to know if this idea is worth pursuing. You estimate the following items related to the project (hint: this table can be copied into an Excel file) Cupcake bakery project description Project life (years) Required retum Sales information Unit sales (anal) 8,500 Unit price S260 Cost information $1.05 Bakery rent (annual) $12,000 Equipment cost (one-time purchase) After-tax equipment salvage (Year 3) Depreciation expense (annual) Tax rate Year Ototal capital spending equipment Change in net working capital 5900 s0 Straight line method 21% $900 Year 0 -$1.500 Year 1 Year 2 Year 3 SO $1,500 (recovery) * This is the federal corporate tax rate Delicious Cupcakes has decided to locate in Washington There is no state corporate tax. It will have to pay gross receipts tax, which you will not include in this analysis. 1. Prepare pro forma income statements for three years 2. Prepare pro forma cash flows from assets (free cash flow) for three years 3. Calculate the project's NPV 4. Calculate the project's IRR 5. Insert a text box in your spreadsheet. In it, state whether you should pursue this project, and briefly explain your rationale Itemization for Income statement and free cash flows are provided below. Income statement Sales Total project free cash flow Operating cash flowEBIT depreciation - tax expense Change in networking capital (NWO) Capital spending Cost of goods sold Gross Profit Fixed Costs Depreciation EBIT-Gross profit-fixed costs-depreciation Tax Expense EBIT tax rate Net Income You have a full-time job but want to bake and sell cupcakes on evenings and weekends. You live in an apartment, so you will need to rent a bakery space and spend some money up front for special equipment. You want to know if this idea is worth pursuing. You estimate the following items related to the project (hint: this table can be copied into an Excel file) Cupcake bakery project description Project life (years) Required retum Sales information Unit sales (anal) 8,500 Unit price S260 Cost information $1.05 Bakery rent (annual) $12,000 Equipment cost (one-time purchase) After-tax equipment salvage (Year 3) Depreciation expense (annual) Tax rate Year Ototal capital spending equipment Change in net working capital 5900 s0 Straight line method 21% $900 Year 0 -$1.500 Year 1 Year 2 Year 3 SO $1,500 (recovery) * This is the federal corporate tax rate Delicious Cupcakes has decided to locate in Washington There is no state corporate tax. It will have to pay gross receipts tax, which you will not include in this analysis. 1. Prepare pro forma income statements for three years 2. Prepare pro forma cash flows from assets (free cash flow) for three years 3. Calculate the project's NPV 4. Calculate the project's IRR 5. Insert a text box in your spreadsheet. In it, state whether you should pursue this project, and briefly explain your rationale Itemization for Income statement and free cash flows are provided below. Income statement Sales Total project free cash flow Operating cash flowEBIT depreciation - tax expense Change in networking capital (NWO) Capital spending Cost of goods sold Gross Profit Fixed Costs Depreciation EBIT-Gross profit-fixed costs-depreciation Tax Expense EBIT tax rate Net Income