Question

A firm is considering a project with the following information: Project will require purchase of a...

A firm is considering a project with the following information: Project will require purchase of a machine for $100,213.00 that is MACRS depreciable over a five-year schedule. (no depreciation until end of year 1). Project will require immediate non-depreciable expenses of $25,888.00 TODAY (year 0). Project will have the following projected balance sheet values of NWC: YEAR 0 1 2 NWC Level $4,000 8.00% of sales 10.00% of sales Sales for the project will be $56,909.00 per year, with all other expenses (excluding depreciation) at 47.00% of sales. The tax rate for the firm is 39.00%, while the cost of capital is 15.00% *assume project goes beyond two years What is the project’s cash flow for year 1?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Project's Cash Flow in Year 1 = $25,662.57

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
A firm is considering a project with the following information: Project will require purchase of a...
A firm is considering a project with the following information: Project will require purchase of a machine for $102,043.00 that is MACRS depreciable over a five-year schedule. (no depreciation until end of year 1). Project will require immediate non-depreciable expenses of $29,988.00 TODAY (year 0). Project will have the following projected balance sheet values of NWC: YEAR 0 1 2 NWC Level $4,000 10.00% of sales 8.00% of sales Sales for the project will be $50,286.00 per year, with all...
A firm is considering a project with the following information: Project will require purchase of a...
A firm is considering a project with the following information: Project will require purchase of a machine for $103,750.00 that is MACRS depreciable over a five-year schedule. (no depreciation until end of year 1). Project will require immediate non-depreciable expenses of $29,227.00 TODAY (year 0). Project will have the following projected balance sheet values of NWC: YEAR 0 1 2 NWC Level $4,000 8.00% of sales 9.00% of sales Sales for the project will be $47,014.00 per year, with all...
A firm is considering a new four year project. To start the project, the firm must...
A firm is considering a new four year project. To start the project, the firm must purchase new equipment today for $300,000. This equipment will be depreciated using a 7-year MACRS schedule. The project will generate annual sales of $260,000. Annual expenses for the project will be 40% of sales (excluding depreciation). The project will require an initial investment in Net Working Capital of $12,000 immediately (year 0). Going forward, the balance sheet level of NWC will be 10% of...
A firm has projected the following financials for a possible project: YEAR 0 1 2 3...
A firm has projected the following financials for a possible project: YEAR 0 1 2 3 4 5 Sales 127,244.00 127,244.00 127,244.00 127,244.00 127,244.00 Cost of Goods 63,531.00 63,531.00 63,531.00 63,531.00 63,531.00 S&A 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00 Depreciation 22,240.20 22,240.20 22,240.20 22,240.20 22,240.20 Investment in NWC 1,146.00 503.00 503.00 503.00 503.00 503.00 Investment in Gross PPE 111,201.00 The firm has a capital structure of 33.00% debt and 67.00% equity. The cost of debt is 9.00%, while the cost of...
Thornley Machines is considering a 3-year project with an initial cost of $618,000. The project will...
Thornley Machines is considering a 3-year project with an initial cost of $618,000. The project will not directly produce any sales but will reduce operating costs by $265,000 a year (i.e., Sales –Costs = 265,000). The equipment is depreciated according to the MACRS 3-year class. At the end of the project the equipment will be sold for an estimated $60,000. The tax rate is 34%. The project will require $23,000 in extra inventory for spare parts and accessories. Find (remembering...
Company A is considering launching a new clothing line. The project would require a $25,000,000 capital...
Company A is considering launching a new clothing line. The project would require a $25,000,000 capital investment and will be depreciated (straight-line to zero) over its 4-year life. The company discovers at the end of the project that it will be able to sell the equipment for $5,300,000 (salvage value). Incremental sales are expected to be $14,500,000 annually for the 4-year period with costs (excluding depreciation) of 55% of sales. The project would also require the company to increase inventory...
Your firm is considering a project that would require purchasing $ 7.2 million worth of new...
Your firm is considering a project that would require purchasing $ 7.2 million worth of new equipment. Determine the present value of the depreciation tax shield associated with this equipment if the? firm's tax rate is 38 %?, the appropriate cost of capital is 8 %?, and the equipment can be? depreciated: please round all answers to 4 decimal points a.? Straight-line over a? ten-year period, with the first deduction starting in one year. b.? Straight-line over a? five-year period,...
Your firm is considering a project that would require purchasing $7.9 million worth of new equipment....
Your firm is considering a project that would require purchasing $7.9 million worth of new equipment. Determine the present value of the depreciation tax shield associated with this equipment if the? firm's tax rate is 33%?, the appropriate cost of capital is 8 %?, and the equipment can be? depreciated: a.? Straight-line over a? ten-year period, with the first deduction starting in one year. b.? Straight-line over a? five-year period, with the first deduction starting in one year. c. Using...
Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered...
Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22,741 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $293. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements...
Your company is considering a project which will require the purchase of $635,000 in new equipment....
Your company is considering a project which will require the purchase of $635,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $224,000. Initial net working capital equal to 28.00% of sales will be required. All of the net working capital will be recovered at the end of the project....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT