Question

A new project costs $28 million and has an expected life of 12 years. It will...

A new project costs $28 million and has an expected life of 12 years. It will be depreciated straight line over an 7 year term. EBDT per year for the project is $5.5 million and the firm's tax rate is 40%. Show the expected cashflows per year for this project over its life.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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 new project has an initial cost of $480,000 with an expected life of 8 years....
A new project has an initial cost of $480,000 with an expected life of 8 years. The project is expected to have earnings before depreciation and taxes of $125,000 per year. If the projected is being depreciated over a 3-year term and the firm's tax rate is 40%, calculate the cashflows of the project over its estimated life.
A company has new equipment costs of $2 million, which will be depreciated to zero using...
A company has new equipment costs of $2 million, which will be depreciated to zero using straight-line depreciation over 7 years. The company expects to bring in revenues of $6 million per year for 7 years with production costs of $1.6 million per year. If the company's tax rate is 44%, what are the incremental earnings (not cash flows) of this project in years 1-7? Enter your answer in dollars and round to the nearest dollar.
A new project will require equipment to manufacture that will cost $ 5 million, which will...
A new project will require equipment to manufacture that will cost $ 5 million, which will be depreciated by straight- line depreciation over five years. In addition, there will be $ 6 million spent on marketing in year one. It is expected that the project will bring in revenues of $10 million per year for five years with production and support costs of $ 3 million per year. If the firms’ marginal tax rate is 35%, what is the cash...
A project with a life of 7 years is expected to provide annual sales of $350,000...
A project with a life of 7 years is expected to provide annual sales of $350,000 and costs of $245,000. The project will require an investment in equipment of $625,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 35 percent. What is the annual operating cash flow for the best-case scenario? $106,925 $88,825 $138,175 $60,825 $113,500

A project with a life of 9 years is expected to provide annual sales of $330,000...
A project with a life of 9 years is expected to provide annual sales of $330,000 and costs of $229,000. The project will require an investment in equipment of $595,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 40 percent. What is the annual operating cash flow for the best-case scenario? Multiple Choice $94,140 $104,894 $120,584 $89,204 $53,504
Pasha Entertainment is evaluating a new project that will have a life of 5 years. This...
Pasha Entertainment is evaluating a new project that will have a life of 5 years. This project is estimated to generate sales of $250,000 each year. The annual costs are estimated to be $165,000. At Time 0, Pasha will need to invest $475,000 in new fixed assets. This will be depreciated on a straight-line method over the life of the project with no salvage value. Management has indicated that the sales and costs for this project are accurate within a...
Emperor’s Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The...
Emperor’s Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $1.8 million a year, and variable costs are $2.50 per jar. The product will be priced at $3.40 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 12%,...
A project with a life of 6 years is expected to provide annual sales of $340,000...
A project with a life of 6 years is expected to provide annual sales of $340,000 and costs of $237,000. The project will require an investment in equipment of $610,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 34 percent. What is the annual operating cash flow for the best-case scenario?
We are evaluating a project that costs $500,000, has a life of 8 years, and has...
We are evaluating a project that costs $500,000, has a life of 8 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 50,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $600,000 per year. The tax rate is 22 percent and we require a return of 12 percent on this project. Suppose the projections given for...
Your Company is considering a new project that will require $870,000 of new equipment at the...
Your Company is considering a new project that will require $870,000 of new equipment at the start of the project. The equipment will have a depreciable life of 7 years and will be depreciated to a book value of $65,000 using straight-line depreciation. The cost of capital is 12%, and the firm's tax rate is 40%. Estimate the present value of the tax benefits from depreciation. a. $46,000 b. $115,000 c. $209,933 d. $69,000
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT