Question

Using an Excel spreadsheet, please complete the calculations for this cost-saving problem. Please then submit your Excel worksheet with your Exam. Assumptions: ABC, Inc. is considering investing in a packaging machine for its soup production facility. The estimated cost of this packaging machine is $110,000. The packaging machine is estimated to have a four-year useful life and will be depreciated using the straight-line method. No salvage value is expected at the end of the machine’s life on December 31, Year 4. Further, assume an annual inflation rate beginning in Year 2 of 3.0% per year. The firm’s income tax rate is 35.0%. Year One values for the following have been provided to you by ABC, Inc.’s Accounting Department: Account Year One Value Revenues $800,000 Labor Cost $325,000 Other Cash Expenses $250,000 Note that each of the accounts listed above is expected to increase annually by the 3.0% inflation rate. Annual “Depreciation Expense” on the firm’s currently owned fixed assets is expected to remain at $75,000 per year throughout the four-year analysis. Given the above assumptions, prepare projected Income Statements for ABC, Inc., listing “Revenues” to “After-Tax Profit” for Years 1—4.

Answer 1

Please find the after tax cashflows for Year1 to Year4

We are finding the after tax cashflows for a project. Dont take depreciation expenses of existing assets.