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    Q403 Fall 12

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    Jamie Woods
    The document is a case study involving the purchase of a Thneed asset for $10,000 that generates $2,000 in additional sales but $1,000 in operating costs each year. The Thneed is sold after 2 years for $5,000. It was partially financed with a $5,000 loan at 10% interest due in full in year 2. The case asks the student to calculate the income statement and cash flows over 5 years and determine if it is a good investment.

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    Q403 Fall 12

    Uploaded by

    Jamie Woods
    108 views2 pages
    The document is a case study involving the purchase of a Thneed asset for $10,000 that generates $2,000 in additional sales but $1,000 in operating costs each year. The Thneed is sold after 2 years for $5,000. It was partially financed with a $5,000 loan at 10% interest due in full in year 2. The case asks the student to calculate the income statement and cash flows over 5 years and determine if it is a good investment.

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    The document is a case study involving the purchase of a Thneed asset for $10,000 that generates $2,000 in additional sales but $1,000 in operating costs each year. The Thneed is sold after 2 years for $5,000. It was partially financed with a $5,000 loan at 10% interest due in full in year 2. The case asks the student to calculate the income statement and cash flows over 5 years and determine if it is a good investment.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    108 views2 pages

    Q403 Fall 12

    Uploaded by

    Jamie Woods
    The document is a case study involving the purchase of a Thneed asset for $10,000 that generates $2,000 in additional sales but $1,000 in operating costs each year. The Thneed is sold after 2 years for $5,000. It was partially financed with a $5,000 loan at 10% interest due in full in year 2. The case asks the student to calculate the income statement and cash flows over 5 years and determine if it is a good investment.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    EC 314: Public and Private Investment Fall 2012 Q4: Income Cash Flow #3

    PASS Name:

    NO PASS

    Consider the following transaction that involves the purchase of a Thneed. The Thneed is a 5 year asset with a cost basis of $10,000.00. The Thneed produces a small increase in sales, $2,000.00, but costs and additional $1,000.00 to operate. The Thneed was purchased with a small loan of $5,000.00 at a 10.00% annual rate repaid with a single payment in year 2. You anticipate selling the Thneed in year 2 for $5,000.00. Your rm faces a combined tax rate of 40.00% and a MARR of 5.00%.
    Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 3 Year 33.33 44.45 14.81 7.41 5 Year 20.00 32.00 19.20 11.52 11.52 5.76 7 Year 14.29 24.49 17.49 12.49 8.93 8.92 8.93 4.46 10 Year 10.00 18.00 14.40 11.52 9.22 7.37 6.55 6.55 6.56 6.55 3.28 15 Year 5.00 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95

    Income Statement Year 1 Year 2 Year 3 Year 4 Operating Revenue Operating Expenses Interest Depreciation Taxable Income Tax Net Income Cash Flow Operations Net Income Depreciation Investments Working Capital Gains Tax Finance Net Cash Flow 1. Fill in the Income and Cash Flow Statement above. 2. Is this a good investment?

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