Question

6. A firm is deciding on a new project. Use the following information for the project evaluation and analysis: - The initial costs are $450,000 for fixed assets. The fixed assets will be depreciated straight line to a zero book value over the 3-year life of the project. The fixed assets have an estimated salvage value of $30,000 at the end of the project. - The project also requires an additional $100,000 for net working capital to start the project. All of the net working capital will be recouped at the end of the 3 years. - The project is expected to generate annual sales of $1,000,000 (1,000 units at $1,000) and total costs of $550,000 per year - The firm’s marginal tax rate is 40 percent. - The required rate of return for this project is 20% c) What are the Cash Flows from Assets each year for this project? Year 0 1 2 3 OCF ΔNWC NCS CFFA

Answer #1

CFFA = OCF + /- Changes in Working capital +/- Net Capital Spending

A firm is deciding on a new project.
Use the following information for the project evaluation and
analysis:
- The initial costs are
$450,000 for fixed assets. The fixed assets will be depreciated
straight line to a zero book value over the 3-year
life of the project. The fixed assets have an estimated salvage
value of $30,000 at the end of the project.
- The project also
requires an additional $100,000 for net working capital to start
the...

A firm is deciding on a new project.
-initial costs $450,000 for fixed assets, will depreciate straight
line to zero over 3 year project life
-fixed assets have estimated salvage value of $30,000 at the end of
project
-project requires an additional $100,000 for net working capital to
start the project
-net working capital will be recouped at the end of 3 years
-annual sales of $1,000,000 (1,000 units at $1,000) and total costs
of $550,000/year
-tax rate is 40%...

A firm is deciding on a new project.
Use the following information for the project evaluation and
analysis:
- The initial costs are
$900,000 for fixed assets. The fixed assets will be depreciated
straight line to a zero book value over the 3-year
life of the project. The fixed assets have an estimated salvage
value of $60,000 at the end of the project.
- The project also
requires an additional $200,000 for net working capital. All of the...

Margarite's Enterprises is considering a new project. The
project will require $325,000 for new fixed
assets, $160,000 for additional inventory and $35,000 for
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is expected to increase by $100,000 and long-term debt is expected
to increase by $300,000. The project
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the project. At the end of the project, the fixed assets can be
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Anna is reviewing a new 5-year project with expected sales of
3,400 units, give or take 8 percent. The expected variable cost per
unit is $22 and the expected fixed costs are $47,500. Cost
estimates are considered accurate within a plus or minus 2 percent
range. The depreciation expense is $33,000. The sale price is
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Winston Hardware is analyzing a proposed project that requires
an initial investment of $39,900 for fixed assets and $9,900 for
net working capital. The project is expected to produce operating
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Delia Landscaping is considering a new 4-year project. The
necessary fixed assets will cost $189,000 and be depreciated on a
3-year MACRS and have no salvage value. The MACRS percentages each
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The project will also require net working capital of $3,300 that
will be returned at the end of the project....

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