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FCS Part2 - Sheet3 1 Annual Sales Expenses Direct Materials...

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Sheet3 Page 1 1 LONG BEACH BOARDS Cash Flow analysis – Project X Expected Accrual Figures Annual Sales $350,000 Expenses Direct Materials $40,000 Direct Labor $64,000 Overhead $120,000 Depreciation $75,000 Selling and administrative expenses $18,000 Total Expenses $317,000 Pretax Income $33,000 Income Tax (40%) $13,200 Net Income $19,800 Annual Net Cash Flow LONG BEACH BOARDS Cash Flow analysis – Project Y Expected Accrual Figures Annual Sales $320,000 Expenses Direct Materials $30,000 Direct Labor $66,000 Overhead $120,000 Depreciation $60,000 Selling and administrative expenses $18,000 Total Expenses $294,000 Pretax Income $26,000 Income Tax (40%) $10,400 Net Income $15,600 Annual Net Cash Flow 2 Project X Payback Period Payback period = Cost of investment/Annual Net Cash Flows Payback Period =$350,000/ $94,800 =3.69 years Project Y Payback Period Payback Period = $320,000/ $75,600=4.23 years 3 PROJECT X
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Sheet3 Page 2 Beginning Book value Annual Depreciation Year 1 $300,000 $75,000 Year 2 $225,000 $75,000 Year 3 $150,000 $75,000 Year 4 $75,000 $75,000 All Years Annual Average Investment=(300,000+0)/2=150,000 PROJECT Y Beginning Book value Annual Depreciation Year 1 $300,000 $60,000 Year 2 $240,000 $60,000 Year 3 $180,000 $60,000 Year 4 $120,000 $60,000 Year 5 $60,000 $60,000 All Years Annual Average Investment
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