Question: Question) Today (Year 0), Kangaroo Enterprises is evaluating whether to purchase a new jetboat to operate scenic thrill rides around Lord Howe Island. The company

Question) Today (Year 0), Kangaroo Enterprises is evaluating whether to purchase a new jetboat to operate scenic thrill rides around Lord Howe Island. The company currently has two other boats offering a snorkelling tour and a glass bottom boat tour. The jetboat costs $1,800,000. The jetboat project is expected to last ten years. The Australian Tax Officestates the jetboat should be depreciated to zero over a 15-year life.

In Year 0, the new jetboat tour will result in an increase in inventory for Kangaroo Enterprises from $17,000 to $24,000. The company anticipates that accounts payable immediately required for the jetboat tour will increase by $11,000.

The company has already agreed to sell the jetboat in ten years' time to an unrelated firm for $250,000.

The company is expecting the jetboat rides will be very popular and are anticipating paying a one-off special dividend to shareholders of $150,000 at the end of the project.

Assume the company tax rate is 30%.

What are the 'cash flows at the end'?

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 Accounting Questions!