Finance 486 Final Exam

1. EFN Calculation – 25 points
The most recent Financial Information for Golf Pro Inc. are shown here:
Income Statement Balance Sheet
Sales $3,400 Current Assets $4,400 Current Liabilities $880
Costs 2,800 Fixed Assets 5,700 Long Term Debt 3,580
Taxable Income 600 Equity 5,640
Taxes @ 34% 204 Total 10,100 Total $10,100
Net Income $ 396

Assets, costs and current Liabilities are …show more content…

b. Initial investment is $25,000; cash inflows are $3,000 per year
Year
Cash Flow
PV Factor
Present Value
0
(25,000)
1.0000
(25,000)
1
3,000
0.8772
2,631.60
2
3,000
0.7695
2,308.50
3
3,000
0.6750
2,025
4
3,000
0.5921
1,776.30
5
3,000
0.5194
1,558.20
6
3,000
0.4556
1,366.80
7
3,000
0.3996
1,198.80
8
3,000
0.3506
1,051.80
9
3,000
0.3075
922.50
10
3,000
0.2697
809.10
11
3,000
0.2366
709.80
12
3,000
0.2076
622.80
13
3,000
0.1821
546.30
14
3,000
0.1597
479.10
15
3,000
0.1401
420.30
16
3,000
0.1229
368.70
17
3,000
0.1078
323.40
18
3,000
0.0946
283.80
19
3,000
0.0829
248.70
20
3,000
0.0728
218.40

Net Present Value
19,869.90

The calculations show a negative outcome relating to initial investment, which mean this project is not worth undertaking.

c. Initial investment is $30,000 ; cash inflows are $5,000 per year
Year
Cash Flow
PV Factor
Present Value
0
(30,000)
1.0000
(30,000)
1
5,000
0.8772
4386
2
5,000
0.7695
3847.50
3
5,000
0.6750
3375
4
5,000
0.5921
2960.50
5
5,000
0.5194
2597
6
5,000
0.4556
2278
7
5,000
0.3996
1998
8
5,000
0.3506
1753
9
5,000
0.3075
1537.50
10
5,000
0.2697
1348.50
11
5,000
0.2366
1183
12
5,000
0.2076
1038
13
5,000
0.1821
910.50
14
5,000
0.1597
798.50
15
5,000
0.1401
700.50
16
5,000
0.1229
614.50
17
5,000
0.1078
539
18
5,000
0.0946
473