Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have just started up a new company in Nova Scotia. Your company produces software for the Doctors Online company which provides medical assessments and

image text in transcribed
You have just started up a new company in Nova Scotia. Your company produces software for the "Doctors Online" company which provides medical assessments and treatment recommendations via combination of online doctor appointments and extensive screening questionnaires. You need to invest $200,000 immediately to purchase computer equipment (CCA class number 45 with a CCA rate of 45% and no salvage value) If the anticipated operating costs (excluding your salary) are $15,000 per year increasing at 5% per year (inflation) and the anticipated revenue is $170,000 per year increasing at 3% per year (inflation), what constant amount can you withdraw each year as salary over the 4 year life of the project if you want the company to make 14 % per year (return on your investment)? For this question disregard taxation effect (tax rate=0) a) (2 pts) What will be the annual CCA payments for each year? c) (2 pts) What will be annual costs and revenues accounting for inflation each year? d) (2 pts) Draw the cash flow diagram with indication of all cash flows including the unknowns. e)(4 pts) What will be your salary at the desired rate of return%? f) If the investment is comprised of $100,000 cash and $ 100,000 from a bank loan charging an effective annual interest rate of 4% with annual payments: 1) (3 pts) What will be the annual payments on the bank loan (amortized loan)? What will be the total amount of interest paid to the bank? ) (4 pts) What will be your salary at the desired rate of return % in this case

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_2

Step: 3

blur-text-image_3

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

Lab Manual To Accompany Auditing IT Infrastructure For Compliance Version 2

Authors: Martin Weiss

2nd Edition

1284059189, 978-1284059182

More Books

Students also viewed these Accounting questions