The owner of a bicycle repair shop forecasts revenues of $220,000 a year. Variable costs will be $65,000, and rental costs for theshop are $45,000 a year. Depreciation on the repair tools will be $25,000.a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%.DepreciationPretax profitINCOME STATEMENT0$0b. Calculate the operating cash flow for the repair shop using the three methods given below.i. Dollars in minus dollars out.ii. Adjusted accounting profits.iii. Add back depreciation tax shield.Methods of Calculationi. Dollars in Minus Dollars Outii. Adjusted Accounting profitsiii. Add back depreciation tax shieldOperatingCash Flow

Income statement means the statement which include the sale revenue, cost of goods sold and all…

Answered: The owner of a bicycle repair shop…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The market value of the property that you own is $15 million. The gross annual rental income for this property is $600,000. The tax rate is 28% . The set up costs (renovations ect) in order to use the building and land for your own business operations are $7,000,000. The annual revenue if you were to use the building forr your own business operations with low demand would be $5 million and have a 30% chance of occuring. The annual revenue if you were to use the building for your own business operations with medium demand would be $9 million and have a 40% chance of occuring. he annual revenue if you were to use the building for your own business operations with high demand would be $13 million. The variable costs (% of revenue) is 65 %. The fixed costs are $2.5 million. The costs of capital is 10% and the risk free rate is 3%. he initial cost for setting up the expansion of business can be fully depreciated over 10 years using the straight-line method. The value of land will be…
The owner of a bicycle repair shop forecasts revenues of $240,000 a year. Variable costs will be $70,000, and rental costs for the shop are $50,000 a year. Depreciation on the repair tools will be $30,000. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. Calculate the operating cash flow for the repair shop using the three methods given below: Dollars in minus dollars out. Adjusted accounting profits. Add back depreciation tax shield.
A company must purchase a new machine to increase production. The machine will cost $50,000 to purchase. The following are the remaining cash flows of the machine and its probabilities. The machine is supposed to be used for 6 years and the MARR is 10%. Annual Cost Annual Revenue Calculate the Present Worth. Probability .2 .6 .2 .6 .4 Outcome $3,000 $4,500 $5,500 $35,000 $40,000
It is being decided whether the company is buying a delivery truck worth 25000 USD, which can be rented out to other warehouses in your area. For a useful life of 15 yrs, it is projected that you can earn as much as 3100 USD. At the end of its useful life, the salvage value is zero. Disregarding taxes, the ROR is projected to be approximately equal to: 7.1% 6.5% 5.3% 4.2% Other:
Safe Driving School is considering purchasing new autos costing $235,000. The company's management has estimated that the autos will generate cash flows as follows: $ 80,000 $ 85,000 $ 95,000 $ 45,000 Year 1 Year 2 Year 3 Year 4 Considering the residual value is zero, calculate the payback period. Round to one decimal place
Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $56,000. The annual cash inflows for the next three years will be: Year 1 2 3 Cash Flow $ 28,000 26,000 21,000 Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the financial calculator method. a. Determine the internal rate of return. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Internal rate of return %
Bottoms up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,600 and sell its old washer for $900. The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 20% and the firms tax rate is 21%. a) if the firm uses straight-line depreciation over a 6 year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (negative amounts should be indicated by a minus sign.) annual operating cash flow in year 0? annual operating cash flow in years 1 to 6? b) what is the project NPV? (Do not round intermediate calculations. round answer to 2 decimal places. c) what is the NPV if the investment is entitled to immediate 100% bonus depreciation? (do not round intermediate calculations. round your answer to 2 decimals places.
1. The manager in a canned food processing plant is trying to decide between two labeling machines. Assume an interest rate of 6%. Use annual cash flow analysis to determine which machine should be chosen. First cost Maintenance and operating costs Annual benefit Salvage value Useful life, in years Machine A $15,000 1,600 8,000 3,000 6 Machine B $25,000 400 13,000 6,000 10
A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. Management predicts this machine has a 12-year service life and a $120,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Choose Numerator: 1 7 Accounting Rate of Return Choose Denominator:
Assume that a money manager is considering the buy of a $35,000 machine and that he appraises that the machine will give a return (net of working expenses) of $10,000 each year for a very long time. Accept that the going pace of interest is a) 8 percent, b) 2% would it be advisable for him to get it?
A firm has invested $50,000 in equipment with a 5-year useful life. The machinery will have a salvage value of $5,000. The annual benefits from the machinery are $13,000 for the first year and increase by $2,000 per year. Assume a combined 30% income tax rate, and the firm uses the SOYD depreciation. Calculate the before-tax IRR. Calculate the after-tax IRR.
The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation on the repair tools will be $10,000. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. Calculate the operating cash flow for the repair shop using the three methods given below: Dollars in minus dollars out. Adjusted accounting profits. Add back depreciation tax shield.

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS