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Initial Investment (Equipment Cost): $465,000 Salvage Value of Equipment: $100,000 Initial Inventory and Blueberries: $9,000...

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Finance

  • Initial Investment (Equipment Cost): $465,000
  • Salvage Value of Equipment: $100,000
  • Initial Inventory and Blueberries: $9,000
  • Sales in Year 1: 15,000 jars
  • Sales Growth: 50% in Year 2, 15% increase every subsequent year
  • Retail Price per Jar: $16
  • Variable Costs: 25% of Price
  • Inflation: 5% for the next 2 years, 3% thereafter
  • Number of Employees: 2 in Year 1, 3 from Year 2 onwards
  • Initial Employee Salary: $45,000
  • Rent per Month: $2,000
  • Marketing Cost in Year 1: $25,000
  • Accounts Receivable: 45% of Revenue
  • Accounts Payable: 20% of Costs of Goods Sold
  • Initial Inventory Recovery in Year 8: 15% of Revenue

Calculations:

  1. Calculate annual revenues for each year based on the sales growth rate and price per jar.
  2. Calculate variable costs as a percentage of revenue.
  3. Calculate annual salaries, taking inflation into account.
  4. Calculate rent expenses for each year.
  5. Calculate marketing costs, considering inflation.
  6. Calculate accounts receivable and accounts payable.
  7. Calculate net cash flows by subtracting expenses from revenues.
  8. Calculate taxes as 13% of taxable income.
  9. Calculate NPV using a discount rate of 16%.
  10. Calculate IRR using a financial calculator or software.

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