Temporary Housing Services Incorporated (THSI) is considering a project that involves establishing a temporary housing facility in
Question:
Temporary Housing Services Incorporated (THSI) is considering a project that involves establishing a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space at this facility to various agencies and groups that provide relief services in the area. THSI estimates that this project will initially cost $5 million to install and will generate $20 million in revenue during its first and only year of operation (paid in one year). Operating expenses are expected to total $12 million this year and depreciation expenses will be another $3 million. THSI will not require working capital for this investment. THSI's marginal tax rate is 35%.
Ignoring the original investment of $5 million, what is THSI's free cash flow for the first and only year of operation?
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston