Buisness Help I need help understanding how to do this problem. If you could giv

Question

Buisness Help

I need help understanding how to do this problem. If you could give a step by step of how to do it, that would help.

A new venture is launched with an initial investment (cash on $80,000. It generates sales of $40,000 each month. It has monthly operating costs of $36,000. The firm purchases equipment costing each month for the first 4 months. Calculate the return on investment at the end of 12 months. Determine if the cash on hand remains positive at the end of each month. What, if any, investment is required and when?

Explanation / Answer

Please see the table below that will show the cash flow.

What if any additional investment is required?

In the 4th month, an additional $24,000 investment will be required to cover the $30,000 Equipment purchase in month 4.

Calculate the Return on Investment

Total Investment = $80000 (initially) + $24,000 (month 4) = $104,000

Total Income = $4000 x 12 months = $48000

Return on Investment = ($48,000 / $104,000) x 100 = 46.15%

Month Sales Operating Costs Sales - Operating Costs Equipment Purchase Cash on Hand (Initially $80,000) 1 $ 40,000.00 $          36,000.00 $                            4,000.00 $                    30,000.00 $                                           54,000.00 2 $ 40,000.00 $          36,000.00 $                            4,000.00 $                    30,000.00 $                                           28,000.00 3 $ 40,000.00 $          36,000.00 $                            4,000.00 $                    30,000.00 $                                             2,000.00 4 $ 40,000.00 $          36,000.00 $                            4,000.00 $                    30,000.00 $                                        (24,000.00) 24000 Invetment Needed here 5 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                             4,000.00 6 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                             8,000.00 7 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                           12,000.00 8 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                           16,000.00 9 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                           20,000.00 10 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                           24,000.00 11 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                           28,000.00 12 $ 40,000.00 $          36,000.00 $                            4,000.00 $                                           32,000.00

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