Assignment Problem: Financial Accounting
Question 1: Suppose an entrepreneur has an opportunity to spend $ 15000 today on a Mobile App investment that will produce the following net cash flows over the next five years as follows:
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Year
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1
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2
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3
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4
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5
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Cash flows
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$5,000
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5000
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4000
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3000
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3000
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a) How many years this investment needs to break-even assume that the cash flows are already discounted.
b) Show the financial feasibility of this investment using net present value technique assuming that cash flows are not discounted and the discount price (interest rate) 10%.
Question 2: Assume that you are an entrepreneur, and you are preparing your expected financial summary to see the feasibility of your new venture in order to put it in your business plan. After your data collection process about the expected demand and other financial information, you have the following:
1. The total annual demand for the target market 200,000 units which will be shared by all competitors and it is constant for 5 years.
2. The selling price per unit is 4$.
3. The variable cost per unit is 2$.
4. The total annual fixed cost for the first year is $ 10,000 and it will be increased annually by 15%.
5. If the expected sales in units for the first year will be the break-even point and then will be increased annually by 100%. (growth rate).
Depending on the previous information fill the following financial summary of your new venture:
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Items
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Years
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2021
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2022
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2023
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2024
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2025
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Annual Demand in units for your proposed business
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Expected Market Share in %
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Expected Annual Revenue in $
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Cost of Revenue in mce_markernbsp; ( Variable Cost)
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Annual Fixed Cost In $
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Annual Net Profit in $
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Operating Margin
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( profit to revenue %)
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Question 3: Assume that you are an entrepreneur, and you want to prepare the pro-forma financial statement for your proposed business idea for the first year of the business.
1. At the beginning you will have a loan of $ 10000 from the Palestine ICT incubator, and you will pay $ 2000 from your own pocket to have $ 12000 capital to start with.
2. This money will be used to purchase Computer Server of $9000 and other required raw material for producing Computer CDs for a school e-learning tool costing $3000.
3. During the first year your operating projections will be as follows:
a. Produce 1000 CDs.
b. Cash sales expected to be 700 CDs, the selling price will be $ 50 each.
c. Sales on account expected to be250CDs , the selling price will be $ 50 each.
d. Raw material for producing a CD will cost $ 3.
e. Depreciation on computer server, the life time estimated to be 10 years.
f. The total fixed cost is $ 1000.
According of the information above prepare the pro-forma financial statements (income statement, cash flow statement and balance sheet).
Question 4: The following are the balances of Al-Arabia accounts as in December 31,2017
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Cash
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5,000
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Service Revenue
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100,000
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Utility Expense
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8,000
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Buildings
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65,000
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Common Stock
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45,000
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Accounts Payable
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12,000
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Supplies
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4,000
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Cost of Revenue
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58,000
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Interest Expense
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5,000
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Additional Paid in Capital
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25,000
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Bonds Payable
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40,000
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Supplies Expense
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3,000
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Salaries Expense
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16,000
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Accounts Receivable
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10,000
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Inventories
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45,000
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Income Tax Rate
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30%
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Prepare the Income Statement and the Balance sheet of Al-Arabia accounts as in December 31, 2017.
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