Andronicus Corporation (AC) has the following jumbled information about an investment proposal: a. Revenues in each...
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Andronicus Corporation (AC) has the following jumbled information about an investment proposal: a. Revenues in each of years 1-4 $22,000 b. Year O initial investment = $42,000 c. Inventory level = $11,000 in year 1, $11,700 in year 2, and $6,000 in year 3 d. Production costs $7,600 in each of years 1-4 e. Salvage value = $12,200 in year 4 f. Depreciation = 100% immediate bonus depreciation g. Tax rate 21% h. There is an additional 6-month lag for all cash flows after year O. For example, customers pay consistently with a 6-month lag, as AC does for production costs, taxes, etc. Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 12%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits for tax purposes elsewhere in the business. Note: Do not round your intermediate calculations. Round your final answer to the nearest whole dollar amount. NPV Andronicus Corporation (AC) has the following jumbled information about an investment proposal: a. Revenues in each of years 1-4 $22,000 b. Year O initial investment = $42,000 c. Inventory level = $11,000 in year 1, $11,700 in year 2, and $6,000 in year 3 d. Production costs $7,600 in each of years 1-4 e. Salvage value = $12,200 in year 4 f. Depreciation = 100% immediate bonus depreciation g. Tax rate 21% h. There is an additional 6-month lag for all cash flows after year O. For example, customers pay consistently with a 6-month lag, as AC does for production costs, taxes, etc. Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 12%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits for tax purposes elsewhere in the business. Note: Do not round your intermediate calculations. Round your final answer to the nearest whole dollar amount. NPV
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