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[solution]: Frank Smith Plumbing Data Needed for


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Frank Smith Plumbing

 

Data Needed for analysis:

 

Year-1

 

Year-2

 


 

Project

 

Cost of Capital (borrowing)

 

12.00%

 

Cost of Truck

 

$200,000

 

Cost of additional equiment attached to truck

 

$15,000

 

Tax rate

 

35%

 

Annual Before Tax & Depreciation Truck Projected Earnings

 


 

$70,000

 


 

$70,000

 


 

Depreciation Percentage Rate (MACRS)*

 

20.0%

 

32.0%

 

* The proposed truck has an estimated economic life of seven years but will be treated as a five-year MACRS property

 


 

Calculate the following -- light yellow highlighted cells need to be co

 

Year-0

 


 

Year-1

 


 

Year-2

 


 

Annual Before Tax & Depreciation Truck Projected Earnings

 

Depreciation Expense

 

Annual Before Tax Truck Projected Earnings

 

?

 

Tax

 

Annual Projected Truck Earnings

 

?

 

Depreciation to add back

 

Projected Truck Net Cash Flow

 


 

Decision Criteria:

 

Pay Back Period

 

Discounted Pay Back Period (DPB)**

 

Net Present Value

 

Internal Rate of Return

 

Profitability Index

 


 

Years

 

Years

 


 

Discounted Cash Flow Needed for DPB Calc.

 

Recommendations:

 


 

mith Plumbing

 


 

ded for analysis:

 

Year-3

 


 

Year-4

 


 

Year-5

 


 

Year-6

 


 

Year-7

 


 

Year-8

 


 

$65,000

 


 

$60,000

 


 

$55,000

 


 

$50,000

 


 

$40,000

 


 

$30,000

 


 

19.2%

 

11.5%

 

11.5%

 

5.8%

 

ed as a five-year MACRS property for depreciation purposes.

 


 

0.0%

 


 

0.0%

 


 

Year-7

 


 

Year-8

 


 

ow highlighted cells need to be completed

 


 

sion Criteria:

 


 

mmendations:

 


 

Year-3

 


 

Year-4

 


 

Year-5

 


 

Year-6

 


 

 


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