Question

In: Finance

A project will require $450,000 for fixed assets and $58,000 for net working capital. The fixed...

A project will require $450,000 for fixed assets and $58,000 for net working capital. The fixed assets will be depreciated straight-line to a zero book value over the five-year life of the project. At the end of the project, the fixed assets will be worthless. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $875,000 and costs of $640,000. The tax rate is 20 percent and the required rate of return is 15 percent. What is the amount of the annual operating cash flow?

Solutions

Expert Solution


Related Solutions

Simco is looking at a project that will require $80,000 in net working capital and $200,000...
Simco is looking at a project that will require $80,000 in net working capital and $200,000 in fixed assets. The project is expected to produce annual sales of $150,000 with associated costs of $100,000. The project has a 10-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35 percent. What is the annual operating cash flow for this project? Group of answer choices $150,000 $46,000 $39,500 $50,000...
Western Tech is considering a new project that will require $118,000 of fixed assets and net...
Western Tech is considering a new project that will require $118,000 of fixed assets and net working capital of $16,000. The fixed assets will be depreciated on a straight-line basis to a zero salvage value over three years. Ignore bonus depreciation. This project is expected to produce an operating cash flow of $45,000 the first year with that amount decreasing by 5 percent annually for two years before the project is shut down. The fixed assets can be sold for...
Fars's Fashions is considering a project that will require $28,000 in net working capital and $96,000...
Fars's Fashions is considering a project that will require $28,000 in net working capital and $96,000 in fixed assets. The project is expected to produce annual sales of $75,000 with associated costs of $67,000. The project has 8-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 30 percent. What is the operating cash flow for this project?
A project has an initial requirement of $350,000 for fixed assets and $30,000 for net working...
A project has an initial requirement of $350,000 for fixed assets and $30,000 for net working capital. The fixed assets will be depreciated to a zero book value over the 3-year life of the project and have an estimated salvage value of $150,000. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $250,000 and the discount rate is 14 percent. What is the project's net present value if...
Net capital spending is equal to: ending net fixed assets minus beginning net fixed assets plus...
Net capital spending is equal to: ending net fixed assets minus beginning net fixed assets plus depreciation. ending total assets minus beginning total assets plus depreciation. ending net fixed assets minus beginning net fixed assets minus depreciation. beginning net fixed assets minus ending net fixed assets plus depreciation.
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital...
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital to start and addition net working capital investments each year equal to 15% of the projected sales increase for the following year. Total fixed costs are $1,350,000 per year, variable production costs are $225 per unit, and the units are priced at $345 each. The equipment needed to begin production has an intalled cost of $23,000,000. The equipment is qualified as seven-year MACRS property....
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital...
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital to start and addition net working capital investments each year equal to 15% of the projected sales increase for the following year. Total fixed costs are $1,350,000 per year, variable production costs are $225 per unit, and the units are priced at $345 each. The equipment needed to begin production has an intalled cost of $23,000,000. The equipment is qualified as seven-year MACRS property....
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital...
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital to start and addition net working capital investments each year equal to 15% of the projected sales increase for the following year. Total fixed costs are $1,350,000 per year, variable production costs are $225 per unit, and the units are priced at $345 each. The equipment needed to begin production has an intalled cost of $23,000,000. The equipment is qualified as seven-year MACRS property....
You find the following financial information about a company: net working capital = $1,032; fixed assets...
You find the following financial information about a company: net working capital = $1,032; fixed assets = $6,089; total assets = $8,542; and long-term debt = $4,567. What are the company's total liabilities?
Ivy is considering a new project. The project will require $2,000,000 for new fixed assets. There...
Ivy is considering a new project. The project will require $2,000,000 for new fixed assets. There is a total of 75,000combjned increase in inventories and account receivables which is partly financed by 25,000 increase is accounts payables. The project has a 6 yr life span. The fixed assets will be depreciated using 7 year MACRS to zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 10% of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT