Fiduciary Responsible Tees Corp. is considering launching a new clothing line. The project would require a...
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Fiduciary Responsible Tees Corp. is considering launching a new clothing line. The project would require a $18,000,000 capital investment and will be depreciated (straight-line to zero) over its 4-year life. The company discovers at the end of the project that it will be able to sell the equipment for $5,250,000 (salvage value). Incremental sales are expected to be $12,500,000 annually for the 4-year period with costs (excluding depreciation) of 60% of sales. The project would also require the company to increase inventory levels by $1,380,000. The company has a 21% tax rate. 1. What is the project cash flow (cash flow from assets) for Year O? 2. What is the project cash flow (cash flow from assets) for Year 2? 3. What is the project cash flow (cash flow from assets) for Year 4? Fiduciary Responsible Tees Corp. is considering launching a new clothing line. The project would require a $18,000,000 capital investment and will be depreciated (straight-line to zero) over its 4-year life. The company discovers at the end of the project that it will be able to sell the equipment for $5,250,000 (salvage value). Incremental sales are expected to be $12,500,000 annually for the 4-year period with costs (excluding depreciation) of 60% of sales. The project would also require the company to increase inventory levels by $1,380,000. The company has a 21% tax rate. 1. What is the project cash flow (cash flow from assets) for Year O? 2. What is the project cash flow (cash flow from assets) for Year 2? 3. What is the project cash flow (cash flow from assets) for Year 4?
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To calculate the project cash flow cash flow from assets for each year we need to consider the incre... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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