Question

Calculate the following using excel (show all work):

Income statement and cash flow statement for Project

Smith Machine Company uses a MARR of 10% and depreciates its assets using a seven-year MACRS. Smith Machine Company’s effective income tax rate is 25%.

Data:

Equipment cost- $35,000 including trade in allowance and sales tax. The total cost of the shipping and handling is $7,500. The total cost to install the coolant system is $68,000. Setup cost of the coolant system will be $13,500. The useful life of the coolant system is 8 years. The coolant system are to be sold at the end of the project for $8,000

Each coolant system will require 1 operator at a rate of $24/hr. The Company shop operates 4080 hr/yr. The total maintenance labor cost is 20% of operating hours at $19/hr. Total annual direct materials are $275,000. Manufacturing overhead excluding depreciation is presumed to be an additional $165,00/yr.

Revenues are expected to be $625,000 for the first year as a result of the project and is expected to increase by 3% each year throughout the project. The project will run for 8 years