ZXY Company is a food product company. ZXY is considering expanding to two new products and a second production facility. The food products are staples with steady demands. The proposed expansion will require an investment of $7,000,000 for equipment with an assumed ten-year life, after which all equipment and other assets can be sold for an estimated $1,000,000. They will be renting the facility. ZXY requires a 12 percent return on investments. You have been asked to recommend whether or not to make the investment.

I need to know if my math is correct?

AutoSave OFF A H FS . C ... 2cf_ZXY_company_financial_statements - Saved to my Mac Q present value Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Insert v Arial 8 AA ab Wrap Text Custom Ex AY- O. Ex Delete v v Z Conditional Format Cell Sort & Find & Analyze BIUV MvAv E Merge & Center v $ ~ % " Sensitivity Paste Formatting as Table Styles Format v Filter Select Data F65 X V fx =F60-F62-F63 A B C D E F G H K L M N 0 P Q R ZXY - Forecast Ten Years 7 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Pro-Forma Income Statement 8 Brand new Acme System - full system 9 Income 10 Revenue 11 12 13 Product A 2,400,000 2,800,000 2,800,000 3,240,000 3,900,000 3,900,000 3,900,000 3,900,000 3,900,000 3,900,000 34,640,000 14 Product B 900,000 ,350,000 2,500,000 3,000,000 4,000,000 4,950,000 5,500,000 22,200,000 15 Total . Revenue 2,400,000 2,800,000 2,800,000 4, 140,000 5,250,000 6,400,000 6,900,000 7,900,000 8,850,000 9,400,000 56,840,000 16 17 18 Cost of Goods Sold 19 Pest Control 50,000 66,550 73,205 73,205 73,205 73,205 73,205 73,205 73,205 73,205 702, 190 20 SQF FDA mandates 90,000 90,000 90,000 90,000 0,000 30,000 30,000 30,000 30,000 30,00 600,000 400,000 408,000 416, 160 424,483 432,973 441,632 450,465 159,474 468,664 478,037 21 Rent - Plant 4,379,888 22 Plant Equip. - Fklf - Scrb/Lease 40,000 $4,000 4,000 $4,000 64,000 64,000 64,00 4,000 $4,000 64,000 616,000 23 Plant Equip. - Ongoing maintenance 50,000 70,000 75,000 75,000 5,000 75,000 75,000 75,000 75,000 75,000 720,000 24 Plant Equip. - Parts 40,000 50,00 50,000 50,000 0,000 50,000 50,000 50,000 50,000 50,000 490,000 25 Miscellaneous - Equipment 15,000 15,000 15,00 15,000 5,000 15,000 15,000 15,000 15,000 15,000 150,000 26 Building repairs 25,000 25,000 25,00 25,000 5,000 25,000 25,000 25,000 25,00 25,000 250,000 27 Plant supplies 100,000 120,000 144,000 09,808 120,789 132,868 146, 154 60,770 176,847 194,532 1,405,767 28 Plant Utilities 120,000 210,000 240,000 240,000 40,000 240,000 240,000 240,000 240,000 240,000 2,250,000 29 Garbage removal/Janitorial 30,000 45,626 52,470 52,470 2,470 52,470 52,470 2,470 52,470 52,470 495,388 30 Plant telephone 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 1,200 72,000 31 Plant payroll expense 495,000 675,000 825,000 885,000 915,000 975,000 1,005,000 1,065,000 1,095,000 1, 125,000 9,060,000 32 Health Benefits 45,360 97,200 105,000 100,00 100,000 100,000 100,000 100,000 100,000 00,000 947,560 33 WC & P/R Expense 59,400 81,000 39,000 106,200 109,800 117,000 120,600 127,800 131,400 135,00 ,087,200 34 Installation/Additional Equipment 250,000 200,000 450,000 35 Total COGS 1,816,960 2,024,576 2,481,035 2,317,366 2,370,437 2,398,375 2,454,095 2,544,919 2,603,786 2,664,444 23,675,993 36 37 Gross Profit 583,040 775,42 318,965 1,822,634 2,879,563 4,001,625 4, 445,905 5,355,081 6,246,214 6,735,556 33, 164,007 38 39 Expenses Other than GOGS Q1 253 104 an 104 an 101 an 104 an 104 an 104 an 104 an 104 040 aan 776 40 1 iahility Incur Gn nnn ZXY Sheet1 + + 117%Q present value 1 8 AutoSave OFF A H FS . C ... 2cf_ZXY_company_financial_statements - Saved to my Mac Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments Insert v Arial 8 AA ab Wrap Text Custom Ex AY- O. Ex Delete v v Z Conditional Format Cell Sort & Find & Analyze Sensitivity Paste BIUV DVAv Merge & Center v $ ~ % " Formatting as Table Styles Format v Filter Select Data F65 X V fx =F60-F62-F63 K M N 0 P Q R A B C D E F G H 31 Plant payroll expense 495,00 675,000 825,000 885,000 915,000 975,000 1,005,000 1,065,000 1,095,000 1, 125,000 9,060,000 97,200 05,000 100,000 100,000 100,000 100,000 00,000 00,000 100,000 947,560 32 Health Benefits 5,360 99,000 09,800 117,000 20,600 127,800 33 WC & P/R Expense 59,400 $1,000 106,200 31,400 135,000 1,087,200 250,000 200,000 450,000 34 Installation/Additional Equipment 1,816,960 2,024,576 2,481,035 2,398,375 2,454,095 2,544,919 2,603, 786 2,664,444 23,675,993 35 Total COGS 2,317,366 2,370,437 36 37 Gross Profit 583,040 175,424 18,965 1,822,634 2,879,563 4,001,625 4,445,905 5,355,081 6,246,214 6,735,556 33, 164,007 38 39 Expenses Other than GOGS 40 Liability Insurance 60,000 91,253 104,940 104,940 104,940 104,940 104,940 04,940 104,940 04,940 990,776 1,500 1,500 1,500 1,500 .500 1,500 1,500 1,500 1,500 1,500 15,000 41 Bank Service Charges 42 Interest on debt 90,627 187,626 232,323 206,766 166,740 122,959 5,071 1,993 7,539 111 1, 121,754 43 Incentive Plan 3,200 16,500 6,50 16,500 16,500 16,500 16,500 6,500 16,500 145,200 180,000 180,000 80,000 180,000 80,000 190,000 190,000 190,000 90,000 190,000 ,850,000 44 Management 21,60 21,600 21,600 21,600 21,600 22,800 22,800 22,800 22,800 22,800 222,000 45 Workers Comp./P/R Taxes 46 Health Insurance Benefit 4,200 5,082 5,590 5,590 5,590 5,590 5,590 5,590 5,590 5,590 54,004 47 Office/Administrative Expenses 2,000 15,972 7,569 17,56 7,569 17,569 17,569 7,569 17,569 168,526 48 Legal and Professional - Tax 30,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000 5,000 5,000 50,000 49 Cellular phones 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 50 Internet Services 4,400 5,856 3,442 5,44 3,442 6,442 6,442 6,442 6,442 6,442 61,793 51 Postage & Delivery 1, 100 1,464 1,611 1,611 1,611 1,611 1,611 1,611 1,611 1,611 15,448 52 Office supplies 11,000 9,983 10,981 10,98 10,981 10,98 10,98 10,98 10,98 10,98 108,829 1,611 15,448 53 Employee Food & Beverage 1, 100 1,464 1,611 1,611 1,611 1,611 1,611 1,611 1,611 54 Local/Business Taxes 1, 100 1,464 1,611 1,611 1,611 1.611 1,611 1,611 1,611 1.611 15,448 55 Property Taxes 12,000 15,000 15,000 5,00 15,000 15,000 15,000 5,000 5,000 15,000 147,000 56 Travel - Equip. Consultants 25,000 6,500 16,500 5,50 6,500 16,500 16,500 16,500 6,500 16,500 173,500 57 Licenses and Permits 10,000 0,00 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 100,000 58 Total Expense 470,627 592,964 658,777 633,220 593, 194 560,613 512,725 469,647 445, 193 437,765 5,374,724 59 60 Net Income before Depreciation 112,413 182,460 (339,812) 1, 189,413 2,286,369 3,441,012 3,933, 181 4,885,434 5,801,021 6,297,791 27,789,282 61 62 Depreciation Expense ( 185,770 504, 140 652,915 573,415 409,635 325,725 299,025 240,970 124,955 33,450 3,350,000 63 Tax Expense 99,961 934,586 1,090,247 1,393,339 1,702,820 1,879,302 7, 100,255 64 65 Net Income (73,357) (321,680) (992,727) 615,998 1,776,773 2, 180, 701 2,543,909 3,251, 125 3,973,246 4,385,039 17,339,027 66 ZXY Sheet1 + + 117%AutoSave OFF A H C ... MBA-FPX5010_MelendezCandi_Assessment4.2 Home Insert Draw Design Transitions Animations Slide Show Review View ? Tell me Share Comments abc EE Spelling Thesaurus Check Translate New Delete Previous Next Show Always Open Restrict Hide Ink Accessibility Comment Comments Read-Only Permission 4 NPV 5 Year Pre-Tax Cash PV of Cash Flow PV of Cash PV Factor Formula PV Factors Flow Formula Flow @ 12% ANALYSIS -$42,733 -$42,733/ (1 +. 12 ) ^I $38, 154.46 - $38, 154.46/-$42,733 89 AND RESULTS 2 -$121,460 $96,827.17 $96,827.17/-$121,460 80 7 -$121,460/ (1+.12)^2 Present value $9,752,936.29 3 -$740,944 -$740,944/ (1 +.12)13 - $527,389.30 - $527,389.30/-$740,944 .71 8 4 $762,725 $762,725/ (1 +.12) 14 $484,725.53 $484,725.53 /$762,725 64 9 Present value of $ 321,973.24 NANCIAL CRITERIA UPPORT A DECISION residual value at 5 $1,819,654 $1,819,654/ (1+.12)15 $1,032,520.55 $1,032,520.55/$1,819,654 .57 the end of 10 10 years 10 x 6 $2,930,516 $2,930,516/ (1+.12) ^6 $1,484,690.61 $1,484,690.61/$2,930,516 .51 (1000000 x 0.32197324) 11 7 $3,374,796 $3,374,796/ (1+.12)^7 $1,526,586.32 $1,526,586.32/$3,374,796 .45 Present value of $10,074,909.50 total cash in 8 $4,5 14,674 $4,5 14,674/ (1+.12)^8 $1,823,401.1 1 $1,823,401. 1 1/$4,514,674 .40 flows 12 9 $5,651,651 $5,651,651/ (1+.12)19 $2,038,042.01 $2,038,042.01/$5,651,651 .36 NPV ( Present $ 10,074,909.50 value of tota -$7,000,000.00 0 $6,290,402 $6,290,402/ (1+.12)^10 $2,025,341.09 $2,025,341.09/$6,290,402 .32 cash - initial $3,074,909.53 nvestment) 14 Looking at the cash flow per year the initial three years will be in the red where we will not be making a profit. In this chart I have put how the cash flow is projected to decline as well as grow. But after those initial three 15 years the potential profit would be worth the investment. The projected sales we should make the investment in the ZXY Food Production Company it would be a good long-term investment. 16 Slide 13 of 17 English (United States) Notes Comments 104%