QBA Assignment #7

QBA Assignment #7 - more than capable of paying back in the...

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Art Kites Income Statement DATA Kite Material 35 DECISIONS String/Bobbin 5 Assumptions Selling Price 125 Machine Rent 5000 1. SL Depreciation Rent Kiosk(1)/Store(0)? 1 Machine Purchase 8500 2. Service Life 5 years. Machine Rent(1)/Buy(0)? 0 Machine Life 5 3. Tax Rate of 20%. Tax Rate 0.2 4. 4 months of operation. Demand for Kites 420 Kiosk Rent ($/month) 1000 5. Each year Demand Increase by 5% Demand Increase for Kites 1.05 Store Rent 1600 Operating Months 4 INCOME STATEMENT Year 1 Year 2 Year 3 Sales 52500 55125 57881.25 COGS - Material 16800 17640 18522 - Equipment Rent 0 0 0 - Equip Depr 1700 1700 1700 Gross Profit 34000 35785 37659.25 Expenses - Store Rent 4000 4000 4000 Profit BT 30000 31785 33659.25 Taxes 6000 6357 6731.85 Profit AT 24000 25428 26927.4
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Based on the information given in this model, my recommendation for the loan officer is that he should approve the loan based on the fact that Bob will be
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Unformatted text preview: more than capable of paying back in the loan in a reasonable timeframe. This model shows the prospective revenues, costs, and profits of the Bob's business of selling kites. Bob should in fact decide to start this business, as he will be more than capable of paying back loans and/or expenses and also will see in increase in profit each year that the demand for kites increases. But if the demand for kites decreases than the profit will decrease as well, which is risky for business....
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