Question

What is the discounted cash flow in the final year of an investment assuming: $7,000 after-tax...

What is the discounted cash flow in the final year of an investment assuming: $7,000 after-tax cash flows from operations, the machine that is depreciated to $2,000 is sold for $4,000, the project had initially required $4,000 in additional working capital, and a 35% marginal tax rate? Assume the investment has a 10-year life and the discount rate is 12 percent.

Homework Answers

Answer #1
Sale value of machine $        4,000
Less:
Marginal tax $          -700
35%*(4000-2000)
add:
After-tax cash flow from operation $        7,000
Release of working capital $        4,000
Cash Flow for final year $      14,300
Discounting factor 0.32197324
Discounted cash flow $ 4,604.22
($14300*0.3219732)
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the discounted cash flow in the final year of an investment assuming: $7,000 after-tax...
What is the discounted cash flow in the final year of an investment assuming: $7,000 after-tax cash flows from operations, the machine that is depreciated to $2,000 is sold for $4,000, the project had initially required $4,000 in additional working capital, and a 35% marginal tax rate? Assume the investment has a 10-year life and the discount rate is 12 percent.
The Company is considering a new project of 3 years. The initial investment on the the...
The Company is considering a new project of 3 years. The initial investment on the the machine costs $380,190, and will be depreciated on a straight-line basis to zero over the project life. The machine will become worthless in the end. The project will brings in annual operating cash flow of $220,110. It also requires an additional investment in net working capital of $4,000 initially, which will be fully recovered at the end of the project. The tax rate is...
You are considering the following project. What is the expected cash flow for the last year...
You are considering the following project. What is the expected cash flow for the last year (year 3)? This cash flow includes operating cash flow and terminal cash flow. Project life: 3 years Equipment: Cost: $20,000 Economic life: 3 years Salvage value: $4,000 Initial investment in net working capital: $2,000 Revenue: $13,000 in year 1, with a nominal growth rate of 6% per year Fixed cost: $3,000 in year 1 Variable cost: 30% of revenue Corporate tax rate (T): 40%...
Calculating Discounted Payback- An investment project has annual cash inflows of $5,000, $5,500, $6,000, and $7,000,...
Calculating Discounted Payback- An investment project has annual cash inflows of $5,000, $5,500, $6,000, and $7,000, and a discount rate of 11 percent. What is the discounted payback period for these cash flows if the initial cost is $8,000? What if the initial cost is $12,000? What if it is $16,000?
You are considering the following project. What is the expected cash flow for the last year...
You are considering the following project. What is the expected cash flow for the last year (year 3)? This cash flow includes operating cash flow and terminal cash flow. Project life: 3 years Equipment: Cost: $20,000 Economic life: 3 years Salvage value: $4,000 Initial investment in net working capital: $2,000 Revenue: $13,000 in year 1, with a nominal growth rate of 6% per year Fixed cost: $3,000 in year 1 Variable cost: 30% of revenue Corporate tax rate (T): 40%...
Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses...
Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment’s estimated salvage value at the end of the project is $9,000. The equipment’s $23,000 cost will be depreciated on a straight-line basis to $0 over a 10-year estimated economic life. Assume that the project requires an initial $7,000 working capital investment. The company’s marginal tax rate...
7. (CMA) Garfield Inc. is considering a 10-year capital investment project with forecasted cash revenues of...
7. (CMA) Garfield Inc. is considering a 10-year capital investment project with forecasted cash revenues of $40,000 per year and forecasted cash operating costs of $29,000 per year. The initial cost of the equipment for the project is $23,000, and Garfield expects to sell the equipment for $9,000 at the end of the tenth year. The equipment will be depreciated on a straight-line basis over seven years for tax purposes. The project requires a working capital investment of $7,000 at...
1. Calculating project cash flows: Why do we use forecasted incremental after-tax free cash flows instead...
1. Calculating project cash flows: Why do we use forecasted incremental after-tax free cash flows instead of forecasted accounting earnings in estimating the NPV of a project? 2. The FCF calculation: How do we calculate incremental after-tax free cash flows from forecasted earnings of a project? What are the common adjustment items? 3. The FCF calculation: How do we adjust for depreciation when we calculate incremental after-tax free cash flow from EBITDA? What is the intuition for the adjustment? 4....
What is the discounted payback period for the investment project that has the following cash flows,...
What is the discounted payback period for the investment project that has the following cash flows, if the discount rate is 14 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Year Cash Flows 0 -12233 1 4492 2 4951 3 5873 4 6995
What is the discounted payback period for the investment project that has the following cash flows,...
What is the discounted payback period for the investment project that has the following cash flows, if the discount rate is 14 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Year Cash Flows 0 (-4056) 1 (1999) 2 (2323) 3 (2851) 4 (2394)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT