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    NPV Analysis- Nagud Company

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    12. The Nagud Company had the following financial information in the annual audited financial statements.

    Balance Sheet
    Current Assets Current Liabilities
    Cash $ 2,500 Accounts Payable $5,000
    Accounts Receivable 5,000 Total Current Liab. 5,000
    Inventory 2,500
    Total Current Assets 10,000

    Fixed Assets 10,000 Long Term Debt (@ 10%) 5,000
    Total Liabilities 10,000

    Stockholders' Equity 10,000
    Total Assets $20,000 Total Liab. and SE $20,000

    Income Statement
    Sales $ 25,000
    Cost of Goods 10,000
    Profit Margin (60%) 15,000
    Operating Expenses 12,000
    Earnings before interest and taxes 3,000
    Interest Expense (no taxes this year) 500
    Net Income $ 2,500

    The following are the assumptions:
    Sales growth: year 1-4%, year 2-6%, and year 3-5%
    Profit Margin: the ratio will stay the same for all three years
    Operating Expenses growth: year 1-5%, year 2-5%, and year 3-5%
    Long Term Debt/Interest: Long-term debt will decrease $500 per year
    Taxes: No taxes. The company has a large loss carry-forward.

    Using the information above, prepare a Net Present Value analysis of the 3-year financial forecast of the Income Statement. The annual discount is assumed to be 6%. I would recommend (not required) setting up an Excel Spreadsheet with supporting work for this problems, noting your answer here and the work in the Excel spreadsheet for my reference. What is the Net Present Value of operations after 3 years?

    Please see attached file for complete details.

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    12. The Nagud Company had the following financial information in the annual audited financial statements

    Balance Sheet
    Current Assets Current Liabilities
    Cash $ 2,500 Accounts Payable $5,000
    Accounts Receivable 5,000 Total Current Liab. 5,000
    Inventory 2,500
    Total Current Assets 10,000 Long Term Debt (@ 10%) 5,000
    Total Liabilities 10,000
    Fixed Assets 10,000 Long Term Debt (@ 10%) 5,000
    Total Liabilities 10,000

    ...

    Solution Summary

    The solution prepares a Net Present Value analysis of the 3-year financial forecast of the Income Statement.

    $2.19

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