Dimaapi, Arrianne Zeanna R..docx

Dimaapi, Arrianne Zeanna R. AT4C – Finman2

Equipment depreciation schedule under MACRS, depreciated over 3 years ($000) Year MACRS % MACRS % x $500 1 33.33 $166,650 2 44.45 222,250 3 14.81 74,050 4 7.41 37,050 $500,000 ($000) Equipment Revenue Direct Cost Expense Depreciation EBT (rounded) Loss Carry Fwd Adjusted EBT Tax (34%) EAT Add back Cash flow Working Capital Sale of business CGT on sale Total Cash Flow Cumulative Cash Flow

0 500

400 (400)

(400) (900)

(900) $(900)

1

2

200 167 (367)

200 222 (422)

(367) 167 (200)

(422) 222 (200)

(200) $(1100)

(200) $(1300)

3

4

5

700 280 300 74 46 (46) 0 0 74 74 (200)

1500 600 500 37 363 (363) 0 0 37 37

5000 2000 1800 1200 (780) 420 143 227 227

37 $(1389)

2500 (180) 2597 $1208

(126) $(1426)

In the problem, it is stated that Sam has saved $1,500,000 to start his business. The said amount is only a few more than the forecasted cash required which is $1,426,000. He has enough cash but with the cash amounts so close, it would be risky to fund this venture without contributions from outside investors.