File Edit View History Bookmarks Window Help C ezto.mheducation.com Course Hero 30071586 532x354 pi Week 7: Homework Question 1 - Week 7: Homework - Connect DeVry Student Portal Saved Help Save & Exit Submit Week 7: Homework i Check my work JIUJELLS IIIE IVIEIIUUZa Will fully LELUVEI ILS IIIual IN IVESUHEIL III HIEL WUIRIIly Capital. Complete this question by entering your answers in the tabs below. 11 points Required 1 Required 2 Required 3 Determine relevant cash flow (after-tax) at project operation. (Do not round intermediate calculations.) eBook Ask Annual After-tax Cash Inflow (time periods 1 through 7): Print Incremental cash revenues Incremental cash expenses: References Raw materials Labor Overhead Raw materials Depreciation (SL basis) Incremental non-cash expenses: $ Incremental operating income After-tax operating income $ Annual after-tax cash inflow $ 0 Mc 16 tv MacBook Pro esc (1)) .- @ $ & N 3 5 6 9 O Q W E R T U O P A S D F G H K Z X C B N M ?File Edit View History Bookmarks Window Help ezto.mheducation.com C Week 7: Homework Question 1 - Week 7: Homework - Connect Course Hero 30071586 532x354 pixels DeVry Student Portal Saved Help Save & Exit Submit Week 7: Homework i Check my work This exercise parallels the machine-purchase decision for the Mendoza Company that is discussed in the body of the chapter. Assume that Mendoza is exploring whether to enter a complementary line of business. The existing business line generates annual cash revenues of approximately $5,250,000 and cash expenses of $3,765,000, one-third of which are labor costs. The current level of 11 investment in this existing division is $12,500,000. (Sales and costs of this division are not affected by the investment decision points regarding the complementary line.) Mendoza estimates that incremental (noncash) net working capital of $43,000 will be needed to support the new business line. No eBook additional facilities-level costs would be needed to support the new line-there is currently sufficient excess capacity. However, the new line would require additional cash expenses (overhead costs) of $458,000 per year. Raw materials costs associated with the new Ask line are expected to be $1,540,000 per year, while the total labor cost is expected to double. Print The CFO of the company estimates that new machinery costing $4,300,000 would need to be purchased. This machinery has a References seven-year useful life and an estimated salvage (terminal) value of $688,000. For tax purposes, assume that the Mendoza Company would use the straight-line method (with estimated salvage value considered in the calculation). Assume, further, that the weighted-average cost of capital (WACC) for Mendoza is 12% (after-tax) and that the combined (federal and state) income tax rate is 26%. Finally, assume that the new business line is expected to generate annual cash revenue of $4,425,000 Required: Determine relevant cash flows (after-tax) at each of the following three points: (1) project initiation, (2) project operation, and (3) project disposal (termination). For purposes of this last calculation, you can assume that the asset is sold at the end of its useful life for the salvage value used to establish the annual straight-line depreciation deductions; further, you can assume that at the end of the project's life Mendoza will fully recover its initial investment in net working capital. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 untion Inn - 16 tv MacBook Pro esc