A) DY CORP
Subject:AccountingPrice: Bought3
A) DY CORP. Is replacing an old machine that has a book value of
30,000 and the company anticipated that it could sell that machine at $25,000. And the new machine needed for the business will cost DY. CORP., of $275,000 and $15,000 charge for shipping and installations. Finally the firm will have to provide for initial net working capital in the amount of $50,000( $30,000 cash balance, $20,000 inventories). The Tax rate is 40%. Marketing Analysis indicates the following revenue stream can be generated over the next 5 years:
YEAR YEAR 2 YEAR 3 YEAR4 YEAR 5
$250,000 $300,000 $325,000 $300,000 $225,000
Sales are expected to increase at first, and then to decline as competitors introduce similar improvements to their products.
Cash Operating costs are estimated to equal to 45% of the revenues. The Operating Cost includes cost of manufacturing and overhead expenses such as salaries utilities, advertising and rent.
