# Investments

Not what you're looking for?

Please see the attached excel sheet. I tried to solve the problem but I need assistance to complete it. Please explain briefly.

Smallerfacility (X) Larger facility (Y)

Space 10,000 15,000

Rent 100000 150000

Additional cost choosing X Sales*0.15

1st year weak sales 250,000

1st year succesfull sales 600,000

Probalility for success 0.7

Probalility for failure 0.3

promotion and miscellaneous expenses 30,000 50,000

Tax 28%

Inventory 100,000 200,000

COGS Sales*0.60

Other Variable costs 0.10*sales 0.10*sales

Other fixed costs 40,000 60,000

Required rate of return 10% 10

Computing net income break even point

Total revenue=Total fixed costs+Total Var.costs+NI

Total revenue sales sales

Fixed costs 240,000 410,000

Variable costs 30,000+0.25* sales 50,000+0.10*sales

Total costs 270,000+0.25*sales 460,000+0.10*sales

BES = (sales-0.25 sales=270,000; sales=270,000/0.75) Similarly for larger facility in column D 360000 511111.1111

Is the above answer correct ? Is it the correct approach? Do we need to take COGS too? Please let me know detailed approach/solution

Cash flow calculation

Sales (first year is half of those after the first year) 0.5*Sales

Total costs 270,000+0.25*sales

Pre-tax profit (Sales- Total costs) 270000-0.5*Sales

Tax (270000-0.5*Sales)*0.28

Net Profit (Cash flow) (270000-0.5*Sales)-(270,0000-0.5*sales)*0.28

Annuity Factor 6.14

PV(CF) ((270000-0.5*Sales)-(270,0000-0.5*sales)*0.28)*6.14

NPV (((270000-0.5*Sales)-(270,0000-0.5*sales)*0.28)*6.14)-240,000

Now NPV=0 ; Hence C46=0; Sales can be had from C46

Is the above approach correct ? What changes are required for Larger facility (D column)? Please make changes with detailed solutions

##### Purchase this Solution

##### Solution Summary

Investment functions solved are examined.

###### Education

- BE, Bangalore University, India
- MS, University of Wisconsin-Madison

###### Recent Feedback

- "Your explanation to the answers were very helpful."
- "What does 1 and 0 means in the repair column?"
- "Went through all of the formulas, excellent work! This really helped me!"
- "try others as well please"
- "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

##### Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

##### Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

##### Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

##### Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.