Decathlon Stores is expanding operations with the introduction of a new distribution center. Not only will sales
Question:
Decathlon Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in inventory will decline due to increased efficiencies in getting inventory to retail stores.
As a result of this new distribution center, Decathlon expects a change in EBIT of \($1,100,000.\) Although inventory is expected to drop from \($95,000\) to \($75,000,\) accounts receivables are expected to climb as a result of increased credit sales from \($85,000\) to \($112,000.\) In addition, accounts payable are expected to increase from \($67,000\) to \($82,000.\) This project will also produce \($250,000\) of depreciation per year, and Decathlon Stores is in the 16 percent marginal tax rate. What is the project’s free cash flow in year 1?
Step by Step Answer:
Foundations Of Finance
ISBN: 9781292318738
10th Global Edition
Authors: Arthur Keown, John Martin, J. Petty