XYZ Contraction Co, Inc.
XYZ Contraction Co, Inc.
from www.atlynx.com/SampleFinancialStatement.pdf
The following is a list of assumptions to be used in your analysis. Each part is to be considered independent when completing the calculations unless specified to go back to an earlier section.
Part A: Ratios
Calculate the ratios given to use as a comparison of what will happen if XYZ decides to take on the green project. Assume the following:
1) ZYZ will borrow against their line of credit in the amount of $40,000
2) Contract receivables would increase by 2%
3) Accounts payable would increase by 1.5%
4) Contract revenue would increase by 1.3%
5) Contract costs would increase by 0.8%
Part B: Work Flow Schedule
6) The green project would take 6 months to complete. See the work flow schedule tab for additional details to complete and assume any cost that run over more than 1 month will be allocated evenly between the months listed.
Part C: Expenses
7) The estimated annual budget for other expenses (shown as part of general and administrative expenses) is expected to increase by 8% for traditional and 9% if XYZ takes on the green project
8) XYZ would also like to project out their professional fees (shown as part of general and administrative expenses) for year 5 if the inflation rate is 0.045. An additional $1,000 would be added to these fees if they take on the green project.
Part D: Payroll
9) XYZ would move up an existing employee who has been with the company over 3 year to a project manager position with a salary of $45,000 per year and a bonus of $1,000 if the job is completed on time and on budget. Applicable tax rates have been entered into the schedule. See payroll tab for additional details to complete.
Part E: Margins
Using the same increases in Contract Revenue and Contract Costs you calculated already in Part A: Ratios, assume:
10) XYZ company has determined the following general and administrative expenses to be fixed: Salaries and Benefits, Insurance, and Occupancy the other items listed they have determined to be variable. The variable expenses will increase by 9% if the company takes on the green project.
11) XYZ would like to maintain a profit and overhead markup based on the Gross Profit Margin found in the Ratio's tab in Part A
Part F: Interest and Investment
12) Calculate interest on the current amount used on the Line of Credit and add an additional $40,000 if XYZ takes on the green project. Assume this increase will remain outstanding until the current Line of Credit terms expire.
13) XYZ is considering investing $25,000 of its cash and would like to know which option would yield the highest return. The options are:
A-Invest $10,000 at 1.2%
B-Invest $20,000 at 1.85%
C-Invest $7,000 at 2.5%
The bank is currently paying 0.5% and all unused money from the investment will remain in the bank at that rate.