Question
In: Finance
Pendant Publishing is considering a new product line that has expected sales of $1,100,000 per year...
Pendant Publishing is considering a new product line that has expected sales of $1,100,000 per year for each of the next 5 years. New equipment that is required to produce the new product will cost $1,200,000. The equipment has a useful life of 5 years and a $300,000 salvage value and will be sold at the end of year 5 for its’ salvage value. Total variable costs of the product line are $450,000 per year, total fixed costs (not including depreciation) will be an additional $180,000 per year and the initial working capital investment, to buy inventory, will be $15,000. The discount rate (interest rate) for the project is 10% and the company’s tax rate is 35%. What is the operating cash flow of year 1 for the company?
A. $305,500
B. $368,500
C. $470,000
D. ($846,500)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Pendant Publishing is considering a new product line that has expected sales of $1,100,000 per year...
Pendant Publishing is considering a new product line that has
expected sales of $1,100,000 per year for each of the next 5 years.
New equipment that is required to produce the new product will cost
$1,200,000. The equipment has a useful life of 5 years and a
$300,000 salvage value and will be sold at the end of year 5 for
its’ salvage value. Total variable costs of the product line are
$450,000 per year, total fixed costs (not including...
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