Question
In: Finance
Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last...
| Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last 6 years and requires an initial fixed asset investment of $5.886 million. The fixed asset will be depreciated straight-line to zero over its 6-year tax life, after which time it will be worthless. Winter Tyme paid $75,000 for a market analysis which indicates the project will generate $5,232,000 in annual sales, with costs of $2,092,800. |
| Required: |
| If the tax rate is 33 percent, what is the OCF for this project? |
Solutions
Expert Solution
Operating cash flow = (Sales - cost- depreciation)*(1-Tax rate) +Depreciation
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | |
| Project | -5886000 | ||||||
| Mrt. Analysis | -75000 | ||||||
| Sales | 5232000 | 5232000 | 5232000 | 5232000 | 5232000 | 5232000 | |
| Cost | -2092800 | -2092800 | -2092800 | -2092800 | -2092800 | -2092800 | |
| Depreciation | -981000 | -981000 | -981000 | -981000 | -981000 | -981000 | |
| Operating profit | 2158200 | 2158200 | 2158200 | 2158200 | 2158200 | 2158200 | |
| PAT | 1445994 | 1445994 | 1445994 | 1445994 | 1445994 | 1445994 | |
| Operating cash flow | 2426994 | 2426994 | 2426994 | 2426994 | 2426994 | 2426994 | |
jeff jeffy answered 1 year agoRelated Solutions
Winter Tyme, Inc., produces coats and jackets for the Seattle market. The company is considering a...
Winter Tyme, Inc., produces coats and jackets for the Seattle
market. The company is considering a new 3-year expansion project
into the Portland market. The expansion requires an initial
investment of $3.402 million in new plant and equipment. These
assets will be depreciated straight-line to zero over its 3-year
tax life, after which time the assets can be sold for $264,600.
The expansion also requires an initial investment in net working
capital of $378,000, but this investment will be recovered...
Expando, Inc., is considering the possibility of building an additional factory that would produce a new...
Expando, Inc., is considering the possibility of building an
additional factory that would produce a new addition to their
product line. The company is currently considering two options. The
first is a small facility that it could build at a cost of $6
million. If demand for new products is low, the company expects to
receive $10 million in discounted revenues (present value of future
revenues) with the small facility. On the other hand, if demand is
high, it expects...
Expando, Inc., is considering the possibility of building an additional factory that would produce a new...
Expando, Inc., is considering the possibility of building an
additional factory that would produce a new addition to their
product line. The company is currently considering two options. The
first is a small facility that it could build at a cost of $6
million. If demand for new products is low, the company expects to
receive $10 million in discounted revenues (present value of future
revenues) with the small facility. On the other hand, if demand is
high, it expects...
Gubanich Sportswear is considering building a new factory to produce aluminum baseball bats. This project would...
Gubanich Sportswear is considering building a new factory to
produce aluminum baseball bats. This project would require an
initial cash outlay of $5,000,000 and would generate annual free
cash inflows of $1,100,000 per year for 6 years. Calculate the
project's NPV given:
a. A required rate of return of 9 percent
b. A required rate of return of 11 percent
c. A required rate of return of 13 percent
d. A required rate of return of 18 percent
Gubanich Sportswear is considering building a new factory to produce aluminum baseball bats. This project would...
Gubanich Sportswear is considering building a new factory to
produce aluminum baseball bats. This project would require an
initial cash outlay of $5,000,000 and would generate annual free
cash inflows of $1,100,000 per year for 7 years. Calculate the
project's NPV given
needs 7%
needs 8%
needs 13%
needs 10%
percentages need to be calculated with problem..
Emily’s Soccer Mania is considering building a new plant. This project would acquire an initial cash...
Emily’s Soccer Mania is considering building a new plant. This
project would acquire an initial cash outlay of $10 million and
would generate annual cash inflows of $3million per year for Years
1 through 4.In year 5 the project will acquire an investment outlay
of $5,000,000. During Years 6 through 10 the project will provide
cash inflows of $5million per year. Calculate the Project’s MIRR
given a discount rate of 14 percent
I want the answer in details not on...
Artie's Wrestling Stuff is considering building a new plant. This plant would require an initial cash...
Artie's Wrestling Stuff is considering building a new plant.
This plant would require an initial cash outlay of $ 8 million and
would generate annual free cash inflows of $ 1 million per year
for 8 years. Calculate the project's MIRR given: a. A required
rate of return of 9 percent b. A required rate of return of 12
percent c. A required rate of return of 15 percent
Red Royal Recycling is considering a project that would last for 2 years. The project would...
Red Royal Recycling is considering a project that would last for
2 years. The project would involve an initial investment of 104,000
dollars for new equipment that would be sold for an expected price
of 104,000 dollars at the end of the project in 2 years. The
equipment would be depreciated to 27,000 dollars over 7 years using
straight-line depreciation. In years 1 and 2, relevant annual
revenue for the project is expected to be 91,000 dollars per year
and...
Red Royal Recycling is considering a project that would last for 2 years. The project would...
Red Royal Recycling is considering a project that would last for
2 years. The project would involve an initial investment of 104,000
dollars for new equipment that would be sold for an expected price
of 104,000 dollars at the end of the project in 2 years. The
equipment would be depreciated to 27,000 dollars over 7 years using
straight-line depreciation. In years 1 and 2, relevant annual
revenue for the project is expected to be 91,000 dollars per year
and...
White Mountain Packaging is considering a project that would last for 2 years. The project would...
White Mountain Packaging is considering a project that would
last for 2 years. The project would involve an initial investment
of 195,000 dollars for new equipment that would be sold for an
expected price of 168,000 dollars at the end of the project in 2
years. The equipment would be depreciated to 27,000 dollars over 7
years using straight-line depreciation. In years 1 and 2, relevant
annual revenue for the project is expected to be 170,000 dollars
per year and...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Phil and Jim were roommates in college and have always competed against each other. Since graduating...
- HashMap is a Map based collection class that is used for storing Key & value pairs,...
- short answer on each questions. 1). which biome is found on the eastern USA? name and...
- Why are agile methodologies generally not suitable for hardware-based projects as opposed to software projects?
- Our idea is a platform that includes services to online shoppers who do not have visa...
- a) In a transportation algorithm, explain the meaning of an improvement index that is equal to...
- Dating is a practice that started in the 1920s and followed the practice of courtship. Current...
ADVERTISEMENT