Need to solve for depreciation, to get earnings before interest & taxes. Use the following info below: Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Terminal Sales Units 492,236 534,175 579,686 629,075 682,673 711,755 742,075 773,688 806,647 841,010 864,979 Unit Price $ 329.00 $ 344.04 $ 359.76 $ 376.20 $ 393.39 $ 402.24 $ 411.29 $ 420.55 $ 430.01 $ 439.68 $ 449.58 Sales Revenue $ 161,945,644.00 $ 183,774,886.84 $ 208,546,572.77 $ 236,657,324.43 $ 268,557,226.62 $ 286,297,714.18 $ 305,210,111.73 $ 325,371,833.89 $ 346,865,409.18 $ 369,778,817.81 $ 388,874,658.19 VC per unit $ 156.00 $ 161.05 $ 166.27 $ 171.66 $ 177.22 $ 185.94 $ 195.09 $ 204.69 $ 214.76 $ 225.32 $ 236.41 Total VC $ 76,788,816.00 $ 86,031,154.75 $ 96,385,905.83 $ 107,986,959.72 $ 120,984,322.03 $ 132,344,256.25 $ 144,770,841.95 $ 158,364,233.35 $ 173,233,988.73 $ 189,499,953.48 $ 204,489,816.70 Total FC $ 5,312,975.00 $ 5,484,052.80 $ 5,660,639.29 $ 5,842,911.88 $ 6,031,053.64 $ 6,264,455.42 $ 6,506,889.84 $ 6,758,706.48 $ 7,020,268.42 $ 7,291,952.81 $ 7,574,151.38 Deprec. EBIT Capital Expenditures & Depreciation: According to IRS tax regulations, capital expenditures for the e13 Processor Chip project are required to be depreciated beginning in the year following the year of investment according to the 5-year MACRS schedule. In the terminal phase of growth, investment strategy is anticipated to change to that of a maintenance orientation in support of residual future marketing opportunities presently unknown to the company. As such, the average depreciation charge per year of $789,134 following a straight-line depreciation method is anticipated with an on-going 3-year time horizon strategy. Capital expenditures Year 0: $17,532,107 Capital expenditures Year 1: $2,019,319 Capital expenditures Year 2: $1,129,472 Costs (Variable & Fixed): Variable costs Yr 1: $156.00 per unitExpected Growth of VC Yrs 2-5 : 3.24% Expected Growth of VC Yrs 6-10 : 4.92% Fixed Cost Yr 1: $5,312,975.00 Expected Growth of FC Yrs 2-5: 3.22% Expected Growth Yrs 6-10: 3.87% Sales: Sales (in units) 492,236 in year 1 Growth rate 8.52% for years 2-5 Growth rate 4.26% for years 6-10. Unit price of product in current yr: $329 Unit price of product projected to increase 4.57% in yrs 2-5 Unit price of product projected to increase 2.25% in yrs 6-10

Need to solve for depreciation, to get earnings before interest & taxes. Use the following info below: Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Terminal Sales Units 492,236 534,175 579,686 629,075 682,673 711,755 742,075 773,688 806,647 841,010 864,979 Unit Price $ 329.00 $ 344.04 $ 359.76 $ 376.20 $ 393.39 $ 402.24 $ 411.29 $ 420.55 $ 430.01 $ 439.68 $ 449.58 Sales Revenue $ 161,945,644.00 $ 183,774,886.84 $ 208,546,572.77 $ 236,657,324.43 $ 268,557,226.62 $ 286,297,714.18 $ 305,210,111.73 $ 325,371,833.89 $ 346,865,409.18 $ 369,778,817.81 $ 388,874,658.19 VC per unit $ 156.00 $ 161.05 $ 166.27 $ 171.66 $ 177.22 $ 185.94 $ 195.09 $ 204.69 $ 214.76 $ 225.32 $ 236.41 Total VC $ 76,788,816.00 $ 86,031,154.75 $ 96,385,905.83 $ 107,986,959.72 $ 120,984,322.03 $ 132,344,256.25 $ 144,770,841.95 $ 158,364,233.35 $ 173,233,988.73 $ 189,499,953.48 $ 204,489,816.70 Total FC $ 5,312,975.00 $ 5,484,052.80 $ 5,660,639.29 $ 5,842,911.88 $ 6,031,053.64 $ 6,264,455.42 $ 6,506,889.84 $ 6,758,706.48 $ 7,020,268.42 $ 7,291,952.81 $ 7,574,151.38 Deprec. EBIT Capital Expenditures & Depreciation: According to IRS tax regulations, capital expenditures for the e13 Processor Chip project are required to be depreciated beginning in the year following the year of investment according to the 5-year MACRS schedule. In the terminal phase of growth, investment strategy is anticipated to change to that of a maintenance orientation in support of residual future marketing opportunities presently unknown to the company. As such, the average depreciation charge per year of $789,134 following a straight-line depreciation method is anticipated with an on-going 3-year time horizon strategy. Capital expenditures Year 0: $17,532,107 Capital expenditures Year 1: $2,019,319 Capital expenditures Year 2: $1,129,472 Costs (Variable & Fixed): Variable costs Yr 1: $156.00 per unitExpected Growth of VC Yrs 2-5 : 3.24% Expected Growth of VC Yrs 6-10 : 4.92% Fixed Cost Yr 1: $5,312,975.00 Expected Growth of FC Yrs 2-5: 3.22% Expected Growth Yrs 6-10: 3.87% Sales: Sales (in units) 492,236 in year 1 Growth rate 8.52% for years 2-5 Growth rate 4.26% for years 6-10. Unit price of product in current yr: $329 Unit price of product projected to increase 4.57% in yrs 2-5 Unit price of product projected to increase 2.25% in yrs 6-10

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Need to solve for depreciation, to get earnings before interest & taxes. Use the following info below:

	Yr 0	Yr 1	Yr 2	Yr 3	Yr 4	Yr 5	Yr 6	Yr 7	Yr 8	Yr 9	Yr 10	Terminal
Sales Units		492,236	534,175	579,686	629,075	682,673	711,755	742,075	773,688	806,647	841,010	864,979
Unit Price		$ 329.00	$ 344.04	$ 359.76	$ 376.20	$ 393.39	$ 402.24	$ 411.29	$ 420.55	$ 430.01	$ 439.68	$ 449.58
Sales Revenue		$ 161,945,644.00	$ 183,774,886.84	$ 208,546,572.77	$ 236,657,324.43	$ 268,557,226.62	$ 286,297,714.18	$ 305,210,111.73	$ 325,371,833.89	$ 346,865,409.18	$ 369,778,817.81	$ 388,874,658.19

VC per unit		$ 156.00	$ 161.05	$ 166.27	$ 171.66	$ 177.22	$ 185.94	$ 195.09	$ 204.69	$ 214.76	$ 225.32	$ 236.41
Total VC		$ 76,788,816.00	$ 86,031,154.75	$ 96,385,905.83	$ 107,986,959.72	$ 120,984,322.03	$ 132,344,256.25	$ 144,770,841.95	$ 158,364,233.35	$ 173,233,988.73	$ 189,499,953.48	$ 204,489,816.70
Total FC		$ 5,312,975.00	$ 5,484,052.80	$ 5,660,639.29	$ 5,842,911.88	$ 6,031,053.64	$ 6,264,455.42	$ 6,506,889.84	$ 6,758,706.48	$ 7,020,268.42	$ 7,291,952.81	$ 7,574,151.38
Deprec.
EBIT

Capital Expenditures & Depreciation:

According to IRS tax regulations, capital expenditures for the e13 Processor Chip project are required to be depreciated beginning in the year following the year of investment according to the 5-year MACRS schedule. In the terminal phase of growth, investment strategy is anticipated to change to that of a maintenance orientation in support of residual future marketing opportunities presently unknown to the company. As such, the average depreciation charge per year of $789,134 following a straight-line depreciation method is anticipated with an on-going 3-year time horizon strategy.

Capital expenditures Year 0: $17,532,107
Capital expenditures Year 1: $2,019,319
Capital expenditures Year 2: $1,129,472

Costs (Variable & Fixed):
Variable costs Yr 1: $156.00 per unit
Expected Growth of VC Yrs 2-5 : 3.24%
Expected Growth of VC Yrs 6-10 : 4.92%

Fixed Cost Yr 1: $5,312,975.00
Expected Growth of FC Yrs 2-5: 3.22%
Expected Growth Yrs 6-10: 3.87%

Sales:

Sales (in units) 492,236 in year 1
Growth rate 8.52% for years 2-5
Growth rate 4.26% for years 6-10.
Unit price of product in current yr: $329
Unit price of product projected to increase 4.57% in yrs 2-5
Unit price of product projected to increase 2.25% in yrs 6-10

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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