a) The company AB Cambria manufactured some USB pen drives.

Question

The production cost was £2500. The company sold the pen drives for £5000. There were a number of expenses which included advertising for £500, depreciation for £100, office supplies for £50, rent for £350, taxes of £250 and salaries of £500.
Create a Profit and Loss statement showing gross and net profits and explain how you derived those figures.

b) A company is considering starting a new project to develop an accounting software package to sell to businesses. There are various costs associated with the development of this software, which include staffing, rent, utilities, and marketing.
Those costs will be higher in the first two years when the software development work will take place. The company has plans for marketing the software in years 3 to 5 with projected sales figures.
Based on the above scenario, explain what Discounted Cash Flow Analysis is and how the company can use it to assess the feasibility of the project.

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