* All cash flows are in thousands of dollars. A proposed chemical plant project requires a...

 

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* All cash flows are in thousands of dollars. A proposed chemical plant project requires a fixed capital vestment of FCI - S10,000 at time zero for new process equipment. Plant startup oscurs in yeri, or Jear 1, annual sales are projected to be S1000 and the year I operating cost will be S500. For Jears 2-10, annual sales are projected to be $1500, and operating costs will be $700 per year. $500 for working capital investment is also needed in year 1, and working capital return is expected to equal S500 at the end of the project (year 10). Salvage value of the new process equipment is expected to be $1000 at the end of the oroject The effective income tax rate is 40 Determine after tax cash flows for years 0, 1. 2. and 10 (final vear) onlv. You may assume that other positive Income exists within the company, such that negative taxable income in any given year can be deducted (for tax purposes) in the year incurred. Any depreciation should be calculated using the MACRS Method for equipment with a 9.5-year class life and a 5-Year recovery period (Table 92 in Turton text) Use the table below to document vour intermediate values (in thousands of dollars), and show your calculations (25 pts) Year 10 Year 0 Year 1 Year 2 Taxable income Tax 40% Net income After-tax cash flows * All cash flows are in thousands of dollars. A proposed chemical plant project requires a fixed capital vestment of FCI - S10,000 at time zero for new process equipment. Plant startup oscurs in yeri, or Jear 1, annual sales are projected to be S1000 and the year I operating cost will be S500. For Jears 2-10, annual sales are projected to be $1500, and operating costs will be $700 per year. $500 for working capital investment is also needed in year 1, and working capital return is expected to equal S500 at the end of the project (year 10). Salvage value of the new process equipment is expected to be $1000 at the end of the oroject The effective income tax rate is 40 Determine after tax cash flows for years 0, 1. 2. and 10 (final vear) onlv. You may assume that other positive Income exists within the company, such that negative taxable income in any given year can be deducted (for tax purposes) in the year incurred. Any depreciation should be calculated using the MACRS Method for equipment with a 9.5-year class life and a 5-Year recovery period (Table 92 in Turton text) Use the table below to document vour intermediate values (in thousands of dollars), and show your calculations (25 pts) Year 10 Year 0 Year 1 Year 2 Taxable income Tax 40% Net income After-tax cash flows

Answer rating: 100% (QA)

G23 A E 1 2 10 2 Annual Sales 3 Operating Costs 4 MACRS Depreciat... View the full answer