Question: Smith Industries has a proposed four-year project with $240,000 equipment cost that falls under the 5-year category using straight-line depreciation (i.e. there will be book

Smith Industries has a proposed four-year project with $240,000 equipment cost that falls under the 5-year category using straight-line depreciation (i.e. there will be book value at the end of project in year 4). Accounts Receivables will increase by $18,000. Accounts Payables will increase by $9,000. Inventory will increase by $7,000. The estimated annual EBIT will be $85,000 per year for each of four years. The equipment is expected to be sold for $22,000 in year 4. The firm's marginal tax rate is 30%. Smith Industries estimates that an 11 percent return is required for this project.

a. Find the CAPEX at t=0

b. Find the change in net working capital at t=0

c. Find the initial outlay, CFO= I(subscript 0)

d. Find the annual depreciation

e. Find the net proceeds (salvage value after tax) at t=4

f. Find the terminal cash flow, TCF(subscript 4)

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