A 12-year project required an initial investment of $24 million in a plant and equipment that...

 

Transcribed Image Text:

A 12-year project required an initial investment of $24 million in a plant and equipment that would be built on a plot of land owned by the company. The plot was purchased for $200,000 some years ago by the company for another project that never took off and the company neglected to sell the land. The current appraised market land is $350,000. A feasibility study that conformed the technical usefulness of the asset cost $120,000. The plant and equipment can be depreciated over its useful life of 15 years. At the end of 12 years, the asset can be sold for a salvage value of $6,000,000. The project would need an initial investment in NWC of $2 million. The tax rate is 20%. Calculate the initial cash outlay associated with the project. Refer to the above question. In year one, the project's sales are expected to be $13 million; COGS $6 million; operating expenses $4 million; additional NWC needs $180,000. Calculate the FCF from the project in year one. A 12-year project required an initial investment of $24 million in a plant and equipment that would be built on a plot of land owned by the company. The plot was purchased for $200,000 some years ago by the company for another project that never took off and the company neglected to sell the land. The current appraised market land is $350,000. A feasibility study that conformed the technical usefulness of the asset cost $120,000. The plant and equipment can be depreciated over its useful life of 15 years. At the end of 12 years, the asset can be sold for a salvage value of $6,000,000. The project would need an initial investment in NWC of $2 million. The tax rate is 20%. Calculate the initial cash outlay associated with the project. Refer to the above question. In year one, the project's sales are expected to be $13 million; COGS $6 million; operating expenses $4 million; additional NWC needs $180,000. Calculate the FCF from the project in year one.

Answer rating: 100% (QA)

To calculate the initial cash outlay for the project we need to consider t... View the full answer