Question: Outback Beverages is considering a project for a new beverage called Koala-Kola. The project would require new assets today costing $200,000 that would be written
Outback Beverages is considering a project for a new beverage called Koala-Kola. The project would require new assets today costing $200,000 that would be written off immediately under 100% Bonus Depreciation since Outback anticipates having enough other income to write this cost off against. Additional net working capital of $10,000 would be needed at the beginning of the projects life. The project has a 4-year expected useful life with an expected salvage value of $50,000 and a book value of zero at the end of the 4-year expected useful life. Outback expects Koala-Kola annual sales of $90,000 and annual operating costs of $30,000 during the 4-year life of the project. Outback Beverages marginal tax rate is 25% and their WACC is 10%. What is the total year 4 (operating plus terminal) cash flow for the Koala-Kola project?
Group of answer choices
$92,500
$95,000
$105,000
$82,500
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