Question

A project requires an initial investment in equipment and machinery of $10 million. The equipment is...

A project requires an initial investment in equipment and machinery of $10 million. The equipment is expected to have a 5-year lifetime with no salvage value and will be depreciated on a straight-line basis. The project is expected to generate revenues of $5.1 million each year for the 5 years and have operating expenses (not including depreciation) amounting to 1/3 of revenues. The tax rate is 40%. What is the net cash flow in year 1?

  1. 3.40M
  2. 0.84M
  3. 2.04M
  4. 2.84M
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 project requires an initial investment in equipment and machinery of $10 million. The equipment is...
A project requires an initial investment in equipment and machinery of $10 million. The equipment is expected to have a five-year lifetime with no salvage value and will be depreciated on a straight-line basis. The project is expected to generate revenues of $5.1 million each year for the five years and have operating expenses (not including depreciation) amounting to one-third of revenues. Assume the tax rate is 40% and the cost of capital is 10%. What is the net present...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PDQ Corporation is considering an investment proposal that requires an initial investment of $100,000 in equipment....
PDQ Corporation is considering an investment proposal that requires an initial investment of $100,000 in equipment. Fully depreciated existing equipment may be disposed of for $30,000 pre-tax. The proposed project will have a five-year life, and is expected to produce additional revenue of $45,000 per year. Expenses other than depreciation will be $12,000 per year. The new equipment will be depreciated to zero over the five-year useful life, but it is expected to actually be sold for $25,000. PDQ has...
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment...
Company ABC is considering a new 5-year investment into new production equipment that requires initial investment € 5 million. The project is expected to generate € 1.4 million in annual sales, with costs of € 0.6 million per year for next 5 years. ABC uses the straight-line depreciation over the 5 years of project life (book value assumed to be zero at the end of the project). If the tax rate is 35%. What is the annual operating cash flow...
You are considering a 10-year project: An initial investment (today) in equipment of $900,000 is required....
You are considering a 10-year project: An initial investment (today) in equipment of $900,000 is required. There will be no salvage value for this equipment after 10 years. The equipment is depreciated using the straight-line method, $90,000/year for 10 years. Annual expected revenues are $700,000/year for 10 years (beginning 1 year from today). Annual expected operating expenses are $250,000/year for 10 years (beginning 1 year from today). This $250,000 does not include depreciation. The tax rate is 35%. An investment...
Quad Enterprises is considering a new 3yr expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new 3yr expansion project that requires an initial fixed asset investment of $2.4 million. The fixed asset will be depreciated straight-line to zero over its 3yr life after which it will be worthless. The project is estimated to generate $2,550,000 in annual sales, with operating costs of $1,180,000, not including depreciation cost. If the tax rate is 35%, what is the annual operating cash flow for this project?
A project requires an initial investment in equipment of $100,000. The project is expected to produce...
A project requires an initial investment in equipment of $100,000. The project is expected to produce sales revenues of $120,000 for three years. Manufacturing costs are estimated to be 60% of the revenues. The assets are depreciated using straight-line depreciation. At the end of the project, the firm can sell the equipment for $10,000. The corporate tax rate is 30% and the cost of capital is 15%. What would the NPV if the discount rate were higher by 10% (10%...
P44: A project requires an initial investment of $20.69 million to buy new equipment, and will...
P44: A project requires an initial investment of $20.69 million to buy new equipment, and will provide cash flows for 4 years. After 4 years, the equipment will be worthless. The expected annual sales due to the project are $50 million, expected annual costs are $42 million and annual depreciation is $5 million. The appropriate cost of capital for the project is 12%. The company's tax rate is 27%. Question: What is the project's annual free cash flow in years...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT