User Account

All Pages

Prepare the income statement and the total cash flow

Assignment Help Financial Accounting
Reference no: EM132918496

The company has spent a further $250,400 for a marketing study to determine the expected sales figures for the new baby doll. Fun Toys can manufacture the new baby dolls for $21 each in variable costs. Fixed costs for the operation are estimated to run $2.3 million per year. The estimated sales volume is 165,000, 198,000, 122,500, 75,500, and 48,500 per year for the next five years, respectively. The unit price of the new baby doll will be $98. The necessary equipment can be purchased for $26 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $8.7 million. As previously stated, Fun Toys currently manufactures a baby doll. Production of the existing model is expected to be terminated in two years. If Fun Toys does not introduce the new baby doll, sales will be 85,000 units and 63,000 units for the next two years, respectively. The price of the existing baby doll is $68 per unit, with variable costs of $19 each and fixed costs of $1.6 million per year. If Fun Toys does introduce the new baby doll, sales of the existing baby doll will fall by 2 3,000 units per year, and the price of the existing units will have to be lowered to $48 each. Net working capital for the baby dolls will be 22 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Toyland Toys has a 21 percent corporate tax rate. The company has a target debt to equity ratio of .6 and is currently BB rated. The overall cost of capital of the company is 12 percent. The finance department of the company has asked your team to prepare a report to Nathan, the company's CEO, and the report should answer the following questions.

Problem 1: Can you and your team prepare the income statement and the total cash flow (CFFA) table for this new project? Please use these tables to help explain to Nathan the relevant incremental cash flows of this project?

Reference no: EM132918496

Questions Cloud

Calculate the basic eps for xyz ltd for the year ending june : Calculate the basic EPS for XYZ Ltd for the year ending 30 June 2021. The owners of the preference shares have the right to convert into ordinary shares
What is a diversification strategy : What is a diversification strategy?
Information on team norms from high performance teams : This review the information on team norms from High Performance Teams.
Building a strategy for a business : In building a strategy for a business, what are the most important reasons the leadership should be strongly behind the new strategy?
Prepare the income statement and the total cash flow : Prepare the income statement and the total cash flow (CFFA) table for this new project? Please use these tables to help explain to Nathan relevant incremental
Different types of commercial real estate : 1. List and describe in detail 5 different types of commercial real estate. 2. List and describe in detail the three ways that commercial real estate is valued
What are the implications of the situation for abc ltd : What are the implications of the situation for ABC Ltd's financial statements? The ABC Ltd Board of Directors are concerned that the exploration and evaluation
Foreign market entry strategy : 1. Starbucks has become a phenomenon worldwide, with more than 24,000 stores in more than 60 countries. Sales are great even at relatively high prices for its p
Identify key ideas from each segment that resonated : Identify key ideas from each segment that resonated with you. What were these key ideas? Why did they resonate with you?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Discuss the impact of depreciation expense on the cash flow

Discuss the impact of depreciation expense on the cash flow analysis of a capital project. Also, discuss the types of leasing arrangements

  How an investors financial statement would differ

How an investors' financial statement would differ between assessing they have control over investee and assessing they have significantly influence

  Compute how much do expect to be in retirement account

Compute How much do expect to be in retirement account when you retire? You are planning for your retirement and will be investing $250/month into an IRA

  Which division should be closed and why

After recording lower than anticipated profits last year, Manuel has decided to shut down one of its divisions that is not performing well . Which division should be closed and why?

  Determine what amount of equity income will emily record

In 2020 Ace reported net income of 250,000 and paid dividends of 25,000. For 2020 Determine what amount of equity income will emily record???

  Explain what happens to demand and supply

Assume the market for money is originally in equilibrium. Explain what happens to demand, supply, quantity demanded, and/or quantity supplied, ceteris paribus.

  What was prime cost incurred

What was prime cost incurred? Factor overhead incurred 47,200. Overhead is applied at $12 per direct labor hour. Direct materials purchased $36,800

  Compute for the selling price of the other assets

Cash - 48,500; Other Assets - 520,000; Liabilities - 118,100; WA, Capital -170,475; Compute for the selling price of the other assets

  Registers are fully depreciated and have no disposal value

Cheap-O Foods is considering replacing all 10 of its old cash registers with new ones. The old registers are fully depreciated and have no disposal value. The new registers cost $ 899,640 (in total). Because the new registers are more efficient than ..

  What ending inventory under fifo is

What Ending inventory under FIFO is? A physical count of merchandise inventory on November 30 reveals that there are 60 units on hand.

  Find the arr with annual depreciation

Find the 1.) PBP, 2.) ARR, with annual depreciation of 14,000, 3.) NPV, and 4.) IRR. 5.) Should the equipment be bought? Explain.

  Are any of the reasons given by the chau and hui

Which bond do you think is the best buy? What did you base this answer on? Are any of the reasons given by the Chau, Hui, and Lu correct?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd