Frank Smith Plumbing Solution Guide Part 1

Frank Smith Plumbing – Data Table

 ProjectYear-1Year-2Year-3Year-4Year-5Year-6Year-7Year-8
Cost of Capital (borrowing)12.00%
Cost of Truck$200,000
Cost of additional equiment attached to truck$15,000
Tax rate35%
Annual Before Tax & Depreciation Truck Projected Earnings →$70,000$70,000$65,000$60,000$55,000$50,000$40,000$30,000
Depreciation Percentage Rate (MACRS)*20.0%32.0%19.2%11.5%11.5%5.8%0.0%0.0%

Cash Flow Analysis

The cash flow analysis should be performed in Excel.

(1) EBIDT is given in the spreadsheet.

(2) To find depreciation expense, multiply the value of the truck by the MARCS depreciation rate in each year the table below.

(3) To find projected before tax earnings EBT, subtract depreciation expense from the the first projected earnings.

(4) To find tax, multiply the before tax earnings by the tax rate.

Frank Smith Cash Flow Summary

Annual Before Tax & Depreciation Truck Projected Earnings → $70,000.00$70,000.00$65,000.00$60,000.00$55,000.00$50,000.00$40,000.00$30,000.00
Depreciation Expense40,000.0064,000.0038,400.0023,000.0023,000.0011,600.000.000.00
Annual Before Tax Truck Projected Earnings →30,000.006,000.0026,600.0037,000.0032,000.0038,400.0040,000.0030,000.00
Tax10,500.002,100.009,310.0012,950.0011,200.0013,440.0014,000.0010,500.00
Annual Projected Truck Earnings →$19,500.00$3,900.00$17,290.00$24,050.00$20,800.00$24,960.00$26,000.00$19,500.00
Depreciation to add back40,000.0064,000.0038,400.0023,000.0023,000.0011,600.000.000.00
Projected Truck Net Cash Flow-$215,000.00$59,500.00$67,900.00$55,690.00$47,050.00$43,800.00$36,560.00$26,000.00$19,500.00

 

Financial Ratio Calclations

For the financial ratios, please proceed to Frank Smith Plumbing Part 2 of this guide.

 

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