Question 3 5 pts Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Question 3 5 pts Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar- charged motorcycles (who wants to ride on a cloudy day anyway?) The proposed project has the following features; The firm just spent $300,000 for a marketing study to determine consumer demand (@ t=0). Aero Motorcycles purchased the land the factory will be built on 5 years ago for $2,000,000 and owns it outright (that is, it does not have a mortgage). The land has a current market value of $2,600,000. The project has an initial cost of $20,000,000 (excluding land, hint: the land is not subject to depreciation). If the project is undertaken, at t = 0 the company will need to increase its inventories by $3,500,000, accounts receivable by $1,500,000, and its accounts payable by $2,000,000. This net operating working capital will be recovered at the end of the project's life (t = 10). If the project is undertaken, the company will realize an additional $8,000,000 in sales over each of the next ten years. (i.e. sales in each year are $8,000,000) The company's operating cost (not including depreciation) will equal 50% of sales. The company's tax rate is 35 percent. Use a 10-year straight-line depreciation schedule. At t = 10, the project is expected to cease being economically viable and the factory (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase price). The project's WACC = 10 percent Assume the firm is profitable and able to use any tax credits (i.e. negative taxes). What are the after tax proceeds from the sale of the factory (i.e., ATSV)? Round to nearest whole dollar value. Question 3 5 pts Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar- charged motorcycles (who wants to ride on a cloudy day anyway?) The proposed project has the following features; The firm just spent $300,000 for a marketing study to determine consumer demand (@ t=0). Aero Motorcycles purchased the land the factory will be built on 5 years ago for $2,000,000 and owns it outright (that is, it does not have a mortgage). The land has a current market value of $2,600,000. The project has an initial cost of $20,000,000 (excluding land, hint: the land is not subject to depreciation). If the project is undertaken, at t = 0 the company will need to increase its inventories by $3,500,000, accounts receivable by $1,500,000, and its accounts payable by $2,000,000. This net operating working capital will be recovered at the end of the project's life (t = 10). If the project is undertaken, the company will realize an additional $8,000,000 in sales over each of the next ten years. (i.e. sales in each year are $8,000,000) The company's operating cost (not including depreciation) will equal 50% of sales. The company's tax rate is 35 percent. Use a 10-year straight-line depreciation schedule. At t = 10, the project is expected to cease being economically viable and the factory (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase price). The project's WACC = 10 percent Assume the firm is profitable and able to use any tax credits (i.e. negative taxes). What are the after tax proceeds from the sale of the factory (i.e., ATSV)? Round to nearest whole dollar value.
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
1. When a limited partnership is formed A. The partnership activities are limited B. All partners have limited liability C. Some of the partners have limited liability D. None of the partners have...
-
Abby Novel signed a note with the following on it: Glen Gallwitz 1-8-2002 loaned me $5,000 at 6% interest a total of $10,000.00. The note did not contain a payment schedule or a time for repayment....
-
G.A.S. married his wife, S.I.S., on January 19, 1997. He began to have mental health problems in 2010; that year, he was hospitalized at the Delaware State Hospital for eight weeks. Similar illnesses...
-
Del Gato Clinic deposits all cash receipts on the day they are received and it makes all cash payments by check. At the close of business on June 30, 2008, its Cash account shows an \($11,589\) debit...
-
Clipboard Office Supplys March 31, 2012, budgeted balance sheet follows: The budget committee of Clipboard Office Supply has assembled the following data. Sales in April were $48,000. You forecast...
-
Air (0.5 g) in a system is allowed to expand adiabatically from a pressure of 5.0 MPa and 25 cm3 to a pressure of 0.15 MPa and temperature of 400 C. Determine the total work done and the total change...
-
Implement A* search to solve this 8puzzle problem. Use source code included and complete the functions with comments TODO MUST DEFINE THREE SEPARATE FUNCTIONS USING THE CODE BELOW: 1. def...
-
South Korea is economically advanced relative to North Korea by all the standard measures of economic well-being (e.g., per capita income, GDP, food consumption). North Korea devotes a larger...
-
Where would a manager find all the costs associated with a particular job or project, including materials, labor, and overhead costs?
-
In the time frame of the years covered by the HBS case , how should PayPal allocate investments between the merchant and consumer sides of its platform? Make sure to justify your answer. Identify...
-
Economic recession is defined as a period of overall economic downturn, high unemployment, a drop in the stock market's value, and a decline in the housing market. A union plays a dominant role in a...
-
George turned 7 2 in November 2 0 2 2 . Assume the balance in his IRA on 1 2 / 3 1 / 2 0 2 1 was $ 3 , 5 0 0 , 0 0 0 . What was his Required Minimum Distribution in 2 0 2 2 ?
-
The table below represents the opinions of a sample of 200 people broken down by gender about the latest congressional plan to eliminate anti-trust exemptions for professional baseball For Neutral...
-
Velshi Printers has contracts to complete weekly supplements required by fortysix customers. For the year 2018, manufacturing overhead cost estimates total $600,000 for an annual production capacity...
Study smarter with the SolutionInn App