ABC Company is considering a new project. The required new equipment will cost $74,240 and has...
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ABC Company is considering a new project. The required new equipment will cost $74,240 and has a 3-year MACRS life, with the allowed depreciation rates of 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. The new project is expected to generate constant annual sales of $80,345 and operating costs (excluding depreciation) equal to 40% of annual sales. It also expects an increase in net operating working capital equal to 11.7% of annual sales for each of the next three years. The company's tax rate is 35%. What is the net cash flow in YEAR 1 of this new project? Do not discount the cash flows to year 0. Round your answer to the nearest dollar, but do not include % in your answer, e.g., xx,xxx. (Hint: Use the Net (Operating) Cash Flow formula.) ABC Company is considering a new project. The required new equipment will cost $74,240 and has a 3-year MACRS life, with the allowed depreciation rates of 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. The new project is expected to generate constant annual sales of $80,345 and operating costs (excluding depreciation) equal to 40% of annual sales. It also expects an increase in net operating working capital equal to 11.7% of annual sales for each of the next three years. The company's tax rate is 35%. What is the net cash flow in YEAR 1 of this new project? Do not discount the cash flows to year 0. Round your answer to the nearest dollar, but do not include % in your answer, e.g., xx,xxx. (Hint: Use the Net (Operating) Cash Flow formula.)
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Answer rating: 100% (QA)
To calculate the net cash flow in Year 1 of the new project we need to determine the net operating c... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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