Question

In: Finance

Hollister & Hollister is considering a new project. The project will require $622,000 for new fixed...

Hollister & Hollister is considering a new project. The project will require $622,000 for new fixed assets, $238,000 for additional inventory, and $42,000 for additional accounts receivable. Accounts payable are expected to increase by $175,000. The project has a 6-year life. The fixed assets are in the 5-year MACRS class. At the end of the project, the fixed assets can be sold for 20 percent of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $975,000 and costs of $540,000. The tax rate is 34 percent and the required rate of return is 14 percent. What is the total cash flow in year 6 of this project?

I don't want the answer on excel. And it should give $486,385.25

Solutions

Expert Solution

0 1 2 3 4 5 6
Annual sales $   9,75,000.00 $    9,75,000.00 $      9,75,000.00 $   9,75,000.00 $    9,75,000.00 $   9,75,000.00
Annual costs $   5,40,000.00 $    5,40,000.00 $      5,40,000.00 $   5,40,000.00 $    5,40,000.00 $   5,40,000.00
Depreciation $   1,24,400.00 $    1,99,040.00 $      1,19,424.00 $      71,654.40 $       71,654.40 $       35,827.20
Net operating income $   3,10,600.00 $    2,35,960.00 $      3,15,576.00 $   3,63,345.60 $    3,63,345.60 $   3,99,172.80
Tax at 34% $   1,05,604.00 $       80,226.40 $      1,07,295.84 $   1,23,537.50 $    1,23,537.50 $   1,35,718.75
NOPAT $   2,04,996.00 $    1,55,733.60 $      2,08,280.16 $   2,39,808.10 $    2,39,808.10 $   2,63,454.05
Add: Depreciation $   1,24,400.00 $    1,99,040.00 $      1,19,424.00 $      71,654.40 $       71,654.40 $       35,827.20
Operating cash flow $   3,29,396.00 $    3,54,773.60 $      3,27,704.16 $   3,11,462.50 $    3,11,462.50 $   2,99,281.25
Capital spending $   6,22,000.00 $     -82,104.00
Increase in NWC (238000+42000-175000) $   1,05,000.00 $ -1,05,000.00
Total yearly cash flow $ -7,27,000.00 $   3,29,396.00 $    3,54,773.60 $      3,27,704.16 $   3,11,462.50 $    3,11,462.50 $   4,86,385.25

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

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...
considering a new project will require $800,000 for new fixed assets. There is a total of...
considering a new project will require $800,000 for new fixed assets. There is a total of $6,000 combined increase in inventories and account receivables and $2,000 increase in account payables. The project has a 6-year life. The fixed assets will be depreciated using 5-year MACRS to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 4 percent of their original cost. The net working capital returns...
Margarite’s Enterprises is considering a new project. The project will require $200,000 for new fixed assets...
Margarite’s Enterprises is considering a new project. The project will require $200,000 for new fixed assets and $15,000 for additional investments in net working capital. The project has a 3-year life. The fixed assets will be depreciated using 3-year MACRS to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 5 percent of their original cost. The net working capital returns to its original level at...
Judson Industries is considering a new project. The project will initially require $749,000 for new fixed...
Judson Industries is considering a new project. The project will initially require $749,000 for new fixed assets, $238,000 for additional inventory, and $25,000 for additional accounts receivable. Accounts payable is expected to increase by $70,001. The fixed assets will belong in a 30% CCA class. At the end of the project, in four years' time, the fixed assets can be sold for 40% of their original cost. The net working capital will return to its original level at the end...
Dysound Inc. is considering a new project. The project will require $325,000 for new fixed assets,...
Dysound Inc. is considering a new project. The project will require $325,000 for new fixed assets, $95,000 for additional inventory and accounts receivable (working capital). The project has a 5-year life. The fixed assets belong to a 30% CCA class. At the end of the project there is no salvage cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $554,000 and costs of $430,000....
Noah Industrial, Inc. is considering a new project. The project will require $800,000 for new fixed...
Noah Industrial, Inc. is considering a new project. The project will require $800,000 for new fixed assets. There is a total of $6,000 combined increase in inventories and account receivables and $2,000 increase in account payables. The project has a 6-year life. The fixed assets will be depreciated using 5-year MACRS to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 4 percent of their original...
Dysound Inc. is considering a new project. The project will require $325,000 for new fixed assets,...
Dysound Inc. is considering a new project. The project will require $325,000 for new fixed assets, $95,000 for additional inventory and accounts receivable (working capital). The project has a 5-year life. The fixed assets belong to a 30% CCA class. At the end of the project there is no salvage cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $554,000 and costs of $430,000....
Holly is considering a new project. The project will require $500,000 for new fixed assets, $208,000...
Holly is considering a new project. The project will require $500,000 for new fixed assets, $208,000 for additional inventory, and $36,000 for additional accounts receivable. Short-term debt is expected to increase by $165,000. The project has a 6-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 20 percent of their original cost. The net working capital...
Tech Enterprises is considering a new project that will require $325,000 for fixed assets, $160,000 for...
Tech Enterprises is considering a new project that will require $325,000 for fixed assets, $160,000 for inventory, and $35,000 for accounts receivable. Short-term debt is expected to increase by $100,000. The project has a life of 5 years. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. Ignore bonus depreciation. At the end of the project, the fixed assets can be sold for 25 percent of their original cost and the...
Ausel’s is considering a ten-year project that will require $850,000 for new fixed assets that will...
Ausel’s is considering a ten-year project that will require $850,000 for new fixed assets that will be depreciated straight-line to a zero book value over the ten years. At the end of the project, the fixed assets can be sold for 15 percent of their original cost. The project is expected to generate annual sales of $928,000 and costs of $721,000. The tax rate is 35 percent and the required rate of return is 14.6 percent. What is the net...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT