You are considering creating a new product line in warehouse space that originally cost you $52,895 5
Question:
You are considering creating a new product line in warehouse space that originally cost you $52,895 5 years ago.
The required machinery would cost $6,786, should last 9 years, after which could be scrapped for $887.
Net working capital would need to immediately increase by $4,332, but could return to normal levels after 9 years.
Annual sales and operating costs are expected to be $7,097 and $1,688, respectively.
18% of customers are expected to switch over from your existing product lines.
Your firm's cost of capital (WACC) is 8.3% and effective corporate tax rate is 43%.
Your firm uses straight line depreciation as its depreciation method.
What is this project's incremental cash flow in its final year 9?
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn