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Unformatted text preview: Chemical plant, first processing year data Sales $1,500,000 Manufacturing Costs Direct Materials $150,000 Direct Labor $200,000 Overhead $100,000 Depreciation $200,000 Operating Expenses $150,000 Equipment Purchase $400,000 Borrowing to finance equipment $200,000 Increase in inventories $100,000 Decrease in acct receiveable $20,000 increase is wages payable $30,000 decrease in notes payable $40,000 income taxes $272,000 interest payment on financing $20,000 a) compute working capital requirement during project period Working capital requirement is increase in current assets and current liabilities. Increase in current assets: $80,000 increase in inventories - decrease in acc. Receiva Increase in current liabilities: $(10,000) increase in wages payable - decrease in notes pa Change in net working capital: $90,000 b) What is taxable income during the project period? Gross margin is sales - direct costs: $850,000 Operating income = gross margin - operating expenses - interest payments Operating income = $680,000 this is the taxable income c) What is net income during the project period?What is net income during the project period?...
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