Your company is planning a $216,000 to invest in new equipment. This cost will be depreciated...

Your company is planning a $216,000 to invest in new equipment. This cost will be depreciated on a straight-line basis over a 4-year period. They can salvage it for $45,000. You need to invest $40,000 in new Net Working Capital, which will be returned at the end of the project. The new equipment is expected to generate $489,000 in additional annual sales. Costs are 46% of sales. The tax rate is 34%.

19)What is the Cash Flow From Assets for the last year of this project?

round to nearest dollar. enter the number with commas if necessary

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Expert Solution

Last year Cash flow (4th-year cash flow) = Cash flow from operation of 4th-year + Terminal Cash Flow

Cash flow from operation for 4th year
Sales	$ 489,000.00
(-)Less Costs @ 46% of sales	$ (224,940.00)
EBITD	$ 264,060.00
(-)Less Depreciation	$ (42,750.00)
EBT	$ 221,310.00
(-)Less Tax expences @34%	$ (75,245.40)
EAT	$ 146,064.60
(+)Add Deprection	$ 42,750.00
Total Cash flow from operation for 4th year	$ 188,814.60

*Note*

Depreaction = Value of asset - Salvage Value / No of useful life

Depreaction = $216,000 - $45,000 / 4

Depreaction = $42,750.00

Terminal Cash Flow
Value of the asset	$ 45,000.00
(+)Add Release of Net Working Capital	$ 40,000.00
Total Terminal Cash Flow	$ 85,000.00

Last year Cash flow (4th-year cash flow) = Cash flow from operation of 4th-year + Terminal Cash Flow

Last year Cash flow (4th-year cash flow) = $ 188,814.60 + $ 85,000.00

Last year Cash flow (4th-year cash flow) = $ 273,814.60

jeff jeffy answered 1 year ago

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