Question
In: Finance
A firm considers launching a new product in the market that is expected to generate the...
- A firm considers launching a new product in the market that is expected to generate the following revenues:
|
Year |
Revenues |
|
1 |
£40,000 |
|
2 |
£30,000 |
|
3 |
£20,000 |
|
4 |
£10,000 |
|
Thereafter |
0 |
Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of £45,000 in plant and equipment
- ii. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 40%, what are the project cash flows in each year? [12 marks]
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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investment in equipment is $600,000. The project has an estimated
life of five years. The revenue per year is estimated to be
$400,000, and operating costs per year is estimated to be
$200,000.
The investment in the net working capital will be $40,000 at the
beginning of the project; 40% of this will be recovered at the end
of year 4, and the rest at the end of year...
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life of five years. The revenue per year is estimated to be
$400,000, and operating costs per year is estimated to be
$200,000.
The investment in the net working
capital will be $40,000 at the beginning of the project; 40% of
this will be recovered at the end of year 4, and the rest at the
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life of five years. The revenue per year is estimated to be
$400,000, and operating costs per year is estimated to be $200,000.
The investment in the net working capital will be $40,000 at the
beginning of the project; 40% of this will be recovered at the end
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life of five years. The revenue per year is estimated to be
$400,000, and operating costs per year is estimated to be
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beginning of the project; 40% of this will be recovered at the end
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life of five years. The revenue per year is estimated to be
$400,000, and operating costs per year is estimated to be
$200,000.
The investment in the net working
capital will be $40,000 at the beginning of the project; 40% of
this will be recovered at the end of year 4, and the rest at the
end of year...
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