Question: Construct an annual incremental operating cash flow statements for the next 4 years, using the following: Four - Year Sales Description Year 1 Year 2

Construct an annual incremental operating cash flow statements for the next 4 years, using the following: Four-Year Sales Description Year 1 Year 2 Year 3 Year 4 Units1,5001,5751,6051,626 Sales Price per Unit $240 $252 $264 $276 Unit Cost $100 $105 $110 $115 The sales price and cost are expected to increase by 4.8% annually due to inflation. Further, to handle the new line, the firms Net Working Capital would have to increase by an amount equal to 12% of sales revenues. The firms tax rate is 42%, and its overall weighted average cost of capital is 12.8%. Category Cost Equipment Cost $300,000 Shipping Charge $20,000 Installation Charge $22,000 Economic Life4 Salvage Value $15,000 Tax Rate42.0% Cost of Capital12.8% Net Working Capital (Sales)12.0% Depreciable Basis = Equipment + Freight + Installation = $342,000 Year Percent (%) Basis Depreciation(% x Basis) Remaining Book Value10.3333 $342,000 $113,989 $228,01120.4445 $342,000 $152,019 $75,99230.1481 $342,000 $50,650 $25,34240.0741 $342,000 $25,342 $0

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!