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At the bottom "Sheet one:"? Thanks!

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At the bottom "Sheet one:"?

Thanks!

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Answer #1

For calculating taxable income,let's first calculate cash flow

1. Cash inflows

Sales. $32,00,000

Less:

Variable expenses. $18,00,000

Contribution. $14,00,000

Fixed out of pocket

Expenses. $7,00,000

Net Annual cash inflows $7,00,000

Alternatively it can be completed as

Net operating income $ 4,00,000

Add: Non cash expense

Depreciation. $ 3,00,000

Net cash inflows. $7,00,000

2. Net present value

Initial investment.(yr 0) ($24,00,000)

Total cash inflows (yr1-5). $25,23,500

(As computed above)*Discounting

Factor@12%for 5 years

(7,00,000)*3.605

Net present value. $1,23,500

As the NPV of the project is positive, the project should be accepted

3.IRR

IRR. : Annual net operating income *100

   Initial investment

: $4,00,000/$24,00,000*100

=16.67%

4.Net taxable income

Net operating income -tax

$4,00,000-30%

$2,80,000

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