Question
In: Finance
Cisco is considering the development of a wireless home networking appliance, called HomeNet. Based on market...
Cisco is considering the development of a wireless home networking appliance, called HomeNet. Based on market testing (which the company spent $350,000 on), 225,000 units are expected to be sold per year over the project’s four-year life at an expected wholesale price of $70 per unit. Actual production will be outsourced at a cost of $40 per unit. $8.5 million of new equipment will be purchased and then depreciated using the straight-line method over a 27-year life. They expect the market value of the equipment to depreciate at 2% per year, at which point the company will sell the equipment. Cisco will pay $125,000 in interest expense on debt each year as a result of the project. In year1, the firm must increase its inventory by $50,000, which will return to regular levels at the end of the project. The tax rate is 21%. The WACC for the company is 7.5%.
What is the free cash flow in Year 1?
What is the free cash flow associated with the sale of the equipment in Year 4?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Suppose that Linksys is considering the development of a wireless home networking appliance, called HomeNet. Based...
Suppose that Linksys is considering the development of a
wireless home networking appliance, called HomeNet. Based on
extensive marketing surveys, the sales forecast for HomeNet is
65,000 units per year. Given the pace of technological change,
Linksys expects the product will have a five-year life and an
expected wholesale price of $250 (the price Linksys will receive
from stores). Actual production will be outsourced at a cost
(including packaging) of $135 per unit.
Linksys must also establish a new lab...
Suppose that Linksys is considering the development of a wireless home networking appliance, called HomeNet. Based...
Suppose that Linksys is considering the development of a
wireless home networking appliance, called HomeNet. Based on
extensive marketing surveys, the sales forecast for HomeNet is
65,000 units per year. Given the pace of technological change,
Linksys expects the product will have a five-year life and an
expected wholesale price of $250 (the price Linksys will receive
from stores). Actual production will be outsourced at a cost
(including packaging) of $135 per unit.
Linksys must also establish a new lab...
Suppose that Linksys is considering the development of a wireless home networking appliance, called HomeNet, that...
Suppose that Linksys is considering the development of a
wireless home networking appliance, called HomeNet, that will
provide both the hardware and the software necessary to run an
entire home from any Internet connection. Linksys's receivables
are 14.2% of sales and its payables are 15.8% of COGS. Forecast the
required investment in net working capital for HomeNet assuming
that sales and cost of goods sold (COGS) will be as follows:
Year
0
1
2
3
4
Sales
$23,578
$26,463
$23,579...
Suppose that Linksys is considering the development of a wireless home networking appliance, called HomeNet, that...
Suppose that Linksys is considering the development of a
wireless home networking appliance, called HomeNet, that will
provide both the hardware and the software necessary to run an
entire home from any Internet connection. Linksys's receivables
are 14.1 % of sales and its payables are 15.9% of COGS. Forecast
the required investment in net working capital for HomeNet assuming
that sales and cost of goods sold (COGS) will be as follows:
Year
0
1
2
3
4
Sales
$23,339
$26,341...
Jimmy Jay is considering buying a house appliance called Toomba, which is an automated robot that...
Jimmy Jay is considering buying a house appliance called Toomba,
which is an automated robot that vacuums any surface in the house.
The initial cost of this superb machine is $1,200. Jimmy Jay
estimates that he loses 100 hours every year vacuuming. He predicts
that if he had those hours available he could get two hour shifts
at his job. He currently gets paid $20 per two hour shift and he
expects that value to stay constant. Jimmy gets paid...
National Electric Company (NEC) is considering to develop and market a new appliance using microprocessor technology....
National Electric Company (NEC) is considering to develop and
market a new appliance using microprocessor technology.
NEC’s marketing manager believes that annual sales would be
20,000 units if the units were priced at RM2,200 each. The
engineering department has reported that the firm would need
additional manufacturing capability, and NEC currently has an
option to purchase an existing building, at a cost of RM22 million
which would meet this need. The building would be bought and paid
for at the...
Suppose the home firm is considering whether to enter the foreign market. Assume that the home...
Suppose the home firm is considering whether to enter the
foreign market. Assume
that the home firm has the following costs and demand:
Fixed costs = $400
Marginal costs = $13 per unit
Local price = $25
Local quantity = 20
Export price = $26
Export quantity = 20
a. What is the firm’s average cost from selling only in the
local market?
b. Calculate the firm’s profit from selling (i) just to Home’s
market; (ii) to both markets.
c....
In late 1993, the Weyerhauser Corporation was considering the use of a so-called “Industrial Development Bond”...
In late 1993, the Weyerhauser Corporation was considering the
use of a so-called “Industrial Development Bond” to help finance
the construction of a facility in the state of North Carolina.
Industrial Revenue Bonds (IRBs) and Pollution and Environmental
Control Revenue Bonds (PCBs) were financial instruments issued by a
state or local government authority — in this case, Martin County,
North Carolina. The proceeds from these securities would be used to
finance the development of facilities or the purchase of equipment...
Maryland Home and Community-Based Services (MHCBS) is considering a major expansion that will enable it to...
Maryland Home and Community-Based Services (MHCBS) is
considering a major expansion that will enable it to attract a
different clientele to its organization. Currently, they serve only
34% of the frail elderly seniors and persons with disabilities in
the local area. The new chief CEO would like the organization to
expand its revenue stream by investing in a senior multipurpose
center serving healthy seniors by offering them arts and crafts and
health and wellness programs. The center will also contain...
Amazon is the market leader with roughly 70% of smart home product sales. Its product development...
Amazon is the market leader with roughly 70% of smart home
product sales. Its product development strategy is establishing a
branded smart home ecosystem. It has developed many products for
its AmazonBasics line of products, all of which integrate with
Amazon Echo and Alexa.
For Discussion
What are the benefits offered by Amazon’s smart home products
in terms of the levels of product value (e.g., core,
augmented)?
How would you describe the Amazon Basics line of products in
terms of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- How is “poverty” determined in the United States? What is the official poverty rate? Who are...
- Review the Medsker and McDorman article and Nixon's resignation address. How is the President treated as...
- Your company is deciding whether to invest in a new machine. The new machine will increase...
- NOTE: This is done using Visual Basic. Create an application named You Do It 1. Add...
- Write a program in java which has two arrays of size 4 and 5; merge them...
- Distribution and Supply Chain Goals of Novartis ?
- The CIA triad is widely referenced in today's information security environments as a basic model for...
ADVERTISEMENT