FIN - AAA Carfin, Inc.

AAA Carfin, Inc. is considering a new expanded nation-wide marketing program. A proposal income statement and some additional data are shown below. (The figures are in thousands of dollars, but this need not be part of the calculations as it will not make any difference in the conclusion.)
This proposal does not require any assets that can be depreciated. Assume that the proposed $3,000 marketing program is all S.G.&A. expense and includes all additional the S.G. & A. expenses needed for the marketing program.
Accounts receivable is forecasted to be 30% of revenue in each year starting with year 1. Finished Inventory is forecast at 10% of revenue also starting in year 1.
Accounts Payable is forecast to be $1,000 in year 0 and 20% of the cost of goods sold in each year after year 0. Materials inventory is forecasted at $1,500 in year 0 and 15% of the cost of goods sold in the years after year 0.
Prepare a cash flow statement and determine the present worth.
Income Statement
Year 0 1 2 3
Sales due to marketing program $10,500 $15,000 $25,000
COGS ($6,000) ($7,500) ($12,000)
Gross Margin $4,500 $7,500 $13,000
Marketing Program Expense ($3,000) ($3,000) ($3,000)
EBIT $1,500 $4,500 $10,000
Income Taxes ($375) ($1,125) ($2,500)
Net Income $1,125 $3,375 $7,500

year 0 Percent of
Accounts Receivable $0 30% Revenue
Finished Inventory $0 10% Revenue
Accounts Payable $1,000 20% COGS
Materials Inventory $1,500 15% COGS
Proposal annual cost $3,000
Proposal life span 3 years
Income tax rate 25% annually
MARR 10% annually (EAR)