Question

5. Calculate the change in investment & operating cash flows for a firm for each year...

5. Calculate the change in investment & operating cash flows for a firm for each year using the following information: i) The asset costs $1,000,000 and is depreciated using MACRS for a 3-year asset. ii) The machine will increase sales by $120,000 per year for three years. iii) The tax rate is 45%. iv) Working capital needs increase by $10,000 when the machine is placed in service and is recovered at the end of three years. v) The asset can be sold for $400,000 at the end of three years

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
0 1 2 3
Increase in sales 120000 120000 120000
Depreciation 333300 444500 148100
Incremental NOI -213300 -324500 -28100
Tax at 45% -95985 -146025 -12645
NOPAT -117315 -178475 -15455
Add: Depreciation 333300 444500 148100
Incremental OCF 215985 266025 132645
Net capital expenditure 1000000
Change in net working capital 10000 -10000
After tax salvage value [400000-(400000-74100)*45%] 253345
FCF (Change in investment and OCF) -1010000 215985 266025 395990
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
] Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a...
] Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. • The proposed machine will cost $120,000 and have installation costs of $20,000. It will be depreciated using a 3 year MACRS recovery schedule. It can be sold for $60,000 after three years of use (before tax; at the end of year 3). • The existing machine was purchased two years ago for $95,000 (including installation)....
Ripstart is replacing an old, fully depreciated stamping line with a more efficient machine that will...
Ripstart is replacing an old, fully depreciated stamping line with a more efficient machine that will cost $400,000. The line will be depreciated as a 7-year MACRS asset. With the increased production, Ripstart expects revenues to increase by $85,000 each year, and operating expenses to decrease by $10,000 per year. If Ripstart expects to sell the new machine at the end of year 5 for $95,000, compute the net cash flow in the fifth year. The MACRS depreciation rate during...
x Corp. wants to buy a machine that can be used in a 10-year project. The...
x Corp. wants to buy a machine that can be used in a 10-year project. The machine costs $1,000,000; has a tax life of 10 years, and is depreciated using the straight-line method. The machine can be sold at the end of 10 years for $400,000. If the marginal tax rate is 20 percent, what is the after-tax cash flow from the sale of this asset (termination value of the machine)?
Question 20 What is the present value of $27 received at the end of each year...
Question 20 What is the present value of $27 received at the end of each year for 5 years?Assume a discount rate of 9%. The first payment will be received one year from today I. $42 II. $114 III. $88 IV. $105 V. None of the options specified here Question 16 Winner Lei is thinking of buying a miniature golf course. It is expected to generate cash flows of $40,000 per year in years 1, $50,000 per year in year...
Jasper Metals is considering installing a new molding machine is expected to produce operating cash flows...
Jasper Metals is considering installing a new molding machine is expected to produce operating cash flows of $58,000 per year for 7 years. At the beginning of the project, inventory will decrease by $18,400, accounts receivables will increase by $22,200, and accounts payable will increase by $15,900. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $258,000. The equipment...
A new expansion project will produce operating cash flows of $90,000 a year for four years....
A new expansion project will produce operating cash flows of $90,000 a year for four years. During the life of the project, inventory will increase by $35,000 and accounts receivable will decrease by $10,000. Accounts payable will increase by $15,000, and wages payable will increase by $5,000. At the end of the project, net working capital will return to its normal level. The project requires the purchase of equipment at an initial cost of $70,000. Equipment delivery and installation costs...
Problem # 1 Consider the following for an 8 year special revenue generating project.   (this is...
Problem # 1 Consider the following for an 8 year special revenue generating project.   (this is the base case) Sales revenue $250,000 in the first year and will increase by 20% per year for the next 4 years. In year 6 the revenue will decrease by 15% a year through year 8. There is no expected cash flow after 8 years as this venture has a constrained timeline and no expected value after 8 years. Costs of goods sold will...
The DoNotMissSnow Company is evaluating an asset that may increase sales by $120,000 every year for...
The DoNotMissSnow Company is evaluating an asset that may increase sales by $120,000 every year for 4 years. There is no expected change in net operating working capital. The company's cost of capital is 6%. The proposed asset costs $400,000, will require $20,000 to modify for operations, and falls in the 3-year class MACRS for depreciation rates: .33, .45, .15, and .07 for years 1 through 4, respectively. At the end of the 4 years, it is expected that the...
1) You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year...
1) You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS. This machine generates $200,000 in annual revenue. In year 4, you sold the machine for $250,000. You received a loan for $400,000 on a 5 year loan at 5% (note, you must pay the remaining balance of this loan at the end of year 4 from the proceeds of the sale). In addition, you invested $80,000 in working capital initially. Your company is...
Calculating 'cash flows at the end' Today (Year zero), a company plans to invest in a...
Calculating 'cash flows at the end' Today (Year zero), a company plans to invest in a machine costing $450,000 and operate it for five years at which time it will be sold. For internal management accounting the company depreciates the machine over ten years. Tax rules state the machine is depreciated to zero over a twenty-year life. The company has already agreed to sell the machine in five years’ time to an unrelated firm for $80,000. The company must also...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT