Question

A capital budgeting project will cause EBIT to increase by $44281 per year. The annual depreciation...

A capital budgeting project will cause EBIT to increase by $44281 per year. The annual depreciation expense is $44747. The firm's tax rate is 24%. At the end, the equipment will be sold for its salvage value of $41809; its book value will be $24266 at that time. The initial increase in net working capital of $16363 will be recaptured at the end of the project's life. What is the cash flow in the last year of the project's life, in $? Include both the annual FCF and the terminal CF.
Blank 1. Calculate the answer by read surrounding text.

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 capital budgeting project will cause EBIT to increase by $55916 per year. The annual depreciation...
A capital budgeting project will cause EBIT to increase by $55916 per year. The annual depreciation expense is $42315. The firm's tax rate is 20%. At the end, the equipment will be sold for its salvage value of $41648; its book value will be $24512 at that time. The initial increase in net working capital of $11777 will be recaptured at the end of the project's life. What is the cash flow in the last year of the project's life,...
You are evaluating a capital budgeting replacement project with a net investment of $85,000, which includes...
You are evaluating a capital budgeting replacement project with a net investment of $85,000, which includes both an after-tax salvage from the old asset of $5,000 and an additional working capital investment of $10,000. The expected annual incremental cash flows after-tax is $14,000. The project has a life of 9 years with an expected terminal value at the end of the project of $13,000. The cost of capital of the firm is 10 percent and the firm’s marginal tax rate...
Stockinger Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment...
Stockinger Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $ 314,000 Expected life of the project 4 Salvage value of equipment $ 0 Annual sales $ 665,000 Annual cash operating expenses $ 471,000 Working capital requirement $ 30,000 One-time renovation expense in year 3 $ 97,000 The company’s income tax rate is 30% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use...
Given the following data, calculate the net present value for this capital budgeting project: Annual operating...
Given the following data, calculate the net present value for this capital budgeting project: Annual operating cash flow = $198,500 Fixed asset investment = $649,000 Working capital investment = $38,000 Project life=4 years; Depreciation method=SLD to zero Market salvage value=$187,000; Cost of capital=14%; Tax rate=35%
River Walk Tours is expected to have an EBIT of $184,000 next year. Depreciation, the increase...
River Walk Tours is expected to have an EBIT of $184,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $11,000, $1,500, and $13,000, respectively. All are expected to grow at 6 percent per year for three years. After Year 4, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company's WACC is 9.2 percent and the tax rate is 21 percent. What is the terminal value...
Apex Fitness Club uses straight-line depreciation for a machine costing $25,300, with an estimated four-year life...
Apex Fitness Club uses straight-line depreciation for a machine costing $25,300, with an estimated four-year life and a $2,250 salvage value. At the beginning of the third year, Apex determines that the machine has three more years of remaining useful life, after which it will have an estimated $1,800 salvage value. Required: 1. Compute the machine’s book value at the end of its second year. 2. Compute the amount of depreciation for each of the final three years given the...
Shanks Corporation is considering a capital budgeting project that involves investing $600,000 in equipment that would...
Shanks Corporation is considering a capital budgeting project that involves investing $600,000 in equipment that would have a useful life of 3 years and zero salvage value. The company would also need to invest $20,000 immediately in working capital which would be released for use elsewhere at the end of the project in 3 years. The net annual operating cash inflow, which is the difference between the incremental sales revenue and incremental cash operating expenses, would be $300,000 per year....
A capital budgeting project is being considered for implementation. The asset is a 3-year MACRS class...
A capital budgeting project is being considered for implementation. The asset is a 3-year MACRS class asset with a four-year project life. The cost of the asset, and the first year revenue and operating cost projections are provided in the table below: Price of Asset $280,000.00 Freight / Installation $20,000.00 Depreciation Schedule: Year 1 $99,000.00 Year 2 $135,000.00 Year 3 $45,000.00 Year 4 $21,000.00 Salvage Value $30,000.00 Increase in NWC $25,000.00 Revenues from project $260,000.00 Operating Costs (excluding depreciation) $115,000.00...
A firm is considering investing in a 15-year capital budgeting project with a net investment of...
A firm is considering investing in a 15-year capital budgeting project with a net investment of $14 million. The project is expected to generate annual net cash flows each year of $2 million and a terminal value at the end of the project of $10 million. The firm’s cost of capital is 9 percent and marginal tax rate is 40%. What is the profitability index of this investment? 0.35 0.78 2.86 1.54 1.35
Shanks Corporation is considering a capital budgeting project that involves investing $600,000 in equipment that would...
Shanks Corporation is considering a capital budgeting project that involves investing $600,000 in equipment that would have a useful life of 3 years and zero salvage value. The company would also need to invest $20,000 immediately in working capital which would be released for use elsewhere at the end of the project in 3 years. The net annual operating cash inflow, which is the difference between the incremental sales revenue and incremental cash operating expenses, would be $300,000 per year....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT