You have been hired as a capital budgeting analyst by a sporting goods firm that manufactures athletc
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Question:
You have been hired as a capital budgeting analyst by a sporting goods firm that manufactures athletc shoes and has captured of the overall shoe market. The tors paured o h $ million a year The fixed cos nasket is wwith manufacturing thes shoes is million a year, and variable costs are of revenues. The company's tax rate is The firm believes that it can increase its market share to by investing $ million in a new distribution system which can be depreciated over the system's life of years to a salvage value of zero and spending $ million a year in additional advertising. The company proposes to continue to maintain working capital at of annual revenues.a What is the initial investment for this project?b What is the annual aftertax cash flow from this project?
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