Marcus Tube, a manufacturer of high-quality aluminum tubing, has maintained stable sales and profits over the past 10 years. Although the market for aluminum tubing has been expanding by 3% per year, Marcus has been unsuccessful in sharing this growth. To increase its sales, the firm is considering an aggressive marketing campaign that centers on regularly running ads in all relevant trade journals and exhibiting products at all major regional and national trade shows. The campaign is expected to require an annual tax-deductible expenditure of $152,000 over the next 5 years. Sales revenue, as shown in the income statement for 2020 Marcus Tube Income Statement for the Year Ended December 31, 2020 Sales revenue $19,400,000 Less: Cost of goods sold (78%) 15,132,000 Gross profits $4,268,000 Less: Operating expenses General and administrative expense (12%) $2,328,000 Depreciation expense 490,000 Total operating expense $2,818,000 Earnings before interest and taxes $1,450,000 Less: Taxes (21%) 304,500 Net operating profit after taxes $1,145,500 totaled $19,400,000. If the proposed marketing campaign is not initiated, sales are expected to remain at this level in each of the next 5 years, 2021 through 2025. With the marketing campaign, sales are expected to rise to the levels shown in the table Marcus Tube Sales Forecast Year Sales revenue 2021 $19,900,000 2022 20,400,000 2023 20,900,000 2024 21,900,000 2025 22,900,000 for each of the next 5 years; cost of goods sold is expected to remain at 78% of sales; general and administrative expense (exclusive of any marketing campaign outlays) is expected to remain at 12% of sales; and annual depreciation expense is expected to remain at $490,000. Assuming a 21% tax rate, find the net cash flows over the next 5 years associated with the proposed marketing campaign. The annual operating cash flow without the marketing capaign will be$ ?
Marcus Tube, a manufacturer of high-quality aluminum tubing, has maintained stable sales and profits over the past 10 years. Although the market for aluminum tubing has been expanding by 3% per year, Marcus has been unsuccessful in sharing this growth. To increase its sales, the firm is considering an aggressive marketing campaign that centers on regularly running ads in all relevant trade journals and exhibiting products at all major regional and national trade shows. The campaign is expected to require an annual tax-deductible expenditure of $152,000 over the next 5 years. Sales revenue, as shown in the income statement for 2020
Marcus Tube Income Statement for
the Year Ended December 31, 2020
Sales revenue
$19,400,000
Less: Cost of goods sold (78%)
15,132,000
Gross profits
$4,268,000
Less: Operating expenses
General and administrative expense (12%)
$2,328,000
490,000
Total operating expense
$2,818,000
Earnings before interest and taxes
$1,450,000
Less:
304,500
Net operating profit after taxes
$1,145,500
totaled
If the proposed marketing campaign is not initiated, sales are expected to remain at this level in each of the next 5 years, 2021 through 2025. With the marketing campaign, sales are expected to rise to the levels shown in the table
|
Marcus Tube Sales |
|
|
Year |
Sales revenue |
|
2021 |
$19,900,000 |
|
2022 |
20,400,000 |
|
2023 |
20,900,000 |
|
2024 |
21,900,000 |
|
2025 |
22,900,000 |
for each of the next 5 years; cost of goods sold is expected to remain at 78% of sales; general and administrative expense (exclusive of any marketing campaign outlays) is expected to remain at 12% of sales; and annual depreciation expense is expected to remain at $490,000. Assuming a 21% tax rate, find the net
The annual operating cash flow without the marketing capaign will be$ ?
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Some answers are right but some are missing. These are the following below that I have.
Sales: $19,900
Cost of good sold (78%): $15,552
Gross profit: $4,378
Less: Operating expenses
General and administration expense(12%) : $2,388
Marketing campaign: $152
Total operating expense: $3,030
Net profit before taxes: $1,348
Less: taxes (21%): $283
Net profit ater taxes: $? (How do I calculate this?)
Operating
Incremental cash flow: $? (How do I calculate this?)
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