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Essay / Research Paper Abstract
This 10 page paper answers four questions set by the student showing the stages used and calculation used to produce the answers. The first question looks at calculating net present value (NPV), also included are earnings estimates for a company, issues and calculations concerning a rights issue, and the differences between a share issue and the use of debt to raise finance for a company.
Page Count:
10 pages (~225 words per page)
File: TS14_TEquest7.rtf
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Unformatted sample text from the term paper:
First we will calculate the investment. Research and development 10,000,000 Testing 1,000,000 Equipment 16,000,000 Total investment 27,000,000 The next stage
is to calculate the cash flow each year. There are several assumptions made here. The marketing has been estimated at 500,000, this has been interpreted as equal amounts for each
year. It is also assumed that the fixed overhead cost included the head office cists as well as factory and other fixed costs. The net profit is also shown with
an adjustment for the tax saved due to the writing off of the equipment that is process at 16,000,000 and written off in a straight line, as this will reduce
the amount of tax that is paid. Therefore an adjustment is made to allow for this lower amount of tax. This is a simple calculation, the investment amount in the
equipment is 16,000,00 take off the scrape value of 1,200,000 gives 14,800,000, which then needs to be divided by five the five years giving 2,960,000 top be written off each
year. As tax is at 30% the reduction tax needs to be adjusted by the tax that it will save which is 30% of this amount. This is 888,000 that
needs to be added back in as the allowance. The calculation for the cash flow will then be as follows;
Year 1 Year 2 Year 3 Year 4 Year 5 Price per package (a) 5 5 5 5 5 Variable cost per package (b) 1.8 1.8 1.8 1.8 1.8 Gross
Profit per package (c) (a-b) 3.2 3.2 3.2 3.2 3.2 Number of packages sold (d) 3,000,000 4,000,000 4,000,000 4,000,000 4,000,000 Gross Profit (e) (c x d) 9,600,000 12,800,000 12,800,000
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