Fool Proof Software is considering an expansion project having life for four years. The proposed project has the following features:

Initial cost of the equipment is $200,000, with shipping cost $10,000 and installation cost of $30,000. The equipment will depreciate over 4 years using MACRS at the following rates (33%, 45%, 15%, and 7%) respectively. Inventories will increase by $25,000, and accounts payable will rise by $5,000 The company will sell 100,000 units per year with a price of $2/unit. The companys total operating cost will equal $120,000 each year. At t=4, the project salvage valve is $25,000. The companys tax rate is 40%. The projects WACC is 10%.

1. Calculate the Net Working Capital (NWC) value *

$20,000

$30,000

$25,000

$5,000

Based on the companys information, the fixed capital investment(Depreciable Basis) is *

$200,000

$230,000

$210,000

$240,000

3. Calculate initial investment value *

$240,000

$260,000

$200,000

$230,000

4. Calculate depreciation for 1st year *

$79,200

$70,000

$76,400

$65,000

5. Calculate depreciation for 2nd year *

$120,000

$100,000

$96,000

$108,000

6. Calculate depreciation for 3rd year *

$36,000

$96,000

$65,000

$48,000

7. Calculate depreciation for 4th year *

$14,000

$16,800

$20,000

$16,000

Fool Proof Software is considering an expansion project having life for four years. The proposed project has the following features:

Initial cost of the equipment is $200,000, with shipping cost $10,000 and installation cost of $30,000. The equipment will depreciate over 4 years using MACRS at the following rates (33%, 45%, 15%, and 7%) respectively. Inventories will increase by $25,000, and accounts payable will rise by $5,000 The company will sell 100,000 units per year with a price of $2/unit. The companys total operating cost will equal $120,000 each year. At t=4, the project salvage valve is $25,000. The companys tax rate is 40%. The projects WACC is 10%.

1. Calculate the Net Working Capital (NWC) value *

$20,000

$30,000

$25,000

$5,000

Based on the companys information, the fixed capital investment(Depreciable Basis) is *

$200,000

$230,000

$210,000

$240,000

3. Calculate initial investment value *

$240,000

$260,000

$200,000

$230,000

4. Calculate depreciation for 1st year *

$79,200

$70,000

$76,400

$65,000

5. Calculate depreciation for 2nd year *

$120,000

$100,000

$96,000

$108,000

6. Calculate depreciation for 3rd year *

$36,000

$96,000

$65,000

$48,000

7. Calculate depreciation for 4th year *

$14,000

$16,800

$20,000Fool Proof Software is considering an expansion project having life for four years. The proposed project has the following features:

Initial cost of the equipment is $200,000, with shipping cost $10,000 and installation cost of $30,000. The equipment will depreciate over 4 years using MACRS at the following rates (33%, 45%, 15%, and 7%) respectively. Inventories will increase by $25,000, and accounts payable will rise by $5,000 The company will sell 100,000 units per year with a price of $2/unit. The companys total operating cost will equal $120,000 each year. At t=4, the project salvage valve is $25,000. The companys tax rate is 40%. The projects WACC is 10%.

1. Calculate the Net Working Capital (NWC) value *

$20,000

$30,000

$25,000

$5,000

Based on the companys information, the fixed capital investment(Depreciable Basis) is *

$200,000

$230,000

$210,000

$240,000

3. Calculate initial investment value *

$240,000

$260,000

$200,000

$230,000

4. Calculate depreciation for 1st year *

$79,200

$70,000

$76,400

$65,000

5. Calculate depreciation for 2nd year *

$120,000

$100,000

$96,000

$108,000

6. Calculate depreciation for 3rd year *

$36,000

$96,000

$65,000

$48,000

7. Calculate depreciation for 4th year *

$14,000

$16,800

$20,000

$16,000

8. Calculate the net operating cash flow after tax for 1st year *

$79,000 $79680 $80000 $75430