Sport Science International is considering launching a new sports drink Warrior-Ade. The estimated project life is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sport Science International is considering launching a new sports drink Warrior-Ade. The estimated project life is three years due to the fierce competition in the sports drink market. The project re- quires an upfront investment of $500,000. The salvage value of the new investment is $50,000 at the end of the third year. The company uses the straight-line depreciation. Additionally, the company has estimated the following information: The estimated annual demand for the new sports drink is 300,000 bottles, 200,000 bottles, and 150,000 bottles, respectively, for the three years of the product life. The unit price of the new sports drink is $2.0 per bottle. The cost of inputs (water and additives) is $1.04 per bottle. The company will need to maintain working capital to support the production and sales. The working capital requirements are zero, $50,000, and $100,000, respectively, at the beginning of year 1, at the end of year 1, and at the end of year 2. The working capital will then be recovered at the end of year 3. The company expects the equipment will be sold at a price of $150,000 at the end of year 3. The company faces a marginal tax rate of 30%. Question 4 [5 pts] Using the information about Warrior-Ade provided above, calculate the following: (i) changes in working capital requirements for each year from the liquidation at the end of the project life and the after-tax cash flow Sport Science International is considering launching a new sports drink Warrior-Ade. The estimated project life is three years due to the fierce competition in the sports drink market. The project re- quires an upfront investment of $500,000. The salvage value of the new investment is $50,000 at the end of the third year. The company uses the straight-line depreciation. Additionally, the company has estimated the following information: The estimated annual demand for the new sports drink is 300,000 bottles, 200,000 bottles, and 150,000 bottles, respectively, for the three years of the product life. The unit price of the new sports drink is $2.0 per bottle. The cost of inputs (water and additives) is $1.04 per bottle. The company will need to maintain working capital to support the production and sales. The working capital requirements are zero, $50,000, and $100,000, respectively, at the beginning of year 1, at the end of year 1, and at the end of year 2. The working capital will then be recovered at the end of year 3. The company expects the equipment will be sold at a price of $150,000 at the end of year 3. The company faces a marginal tax rate of 30%. Question 4 [5 pts] Using the information about Warrior-Ade provided above, calculate the following: (i) changes in working capital requirements for each year from the liquidation at the end of the project life and the after-tax cash flow
Expert Answer:
Answer rating: 100% (QA)
Answer To calculate the changes in working capital requirements for each year and the aftertax cash ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Question 1 Suppose the following information is available for an automotive part company to estimate the firm's earnings for the next 10 years. To build its new production line, the company is...
-
Please help with the discusin questions ! I give thumbs up Case #1: Hailing a New Era: Haier in Japan As one of the most valuable brands in China, Haier designs,manufactures, and sells various home...
-
Bill and Mary are married. Mega Corporation employs them both. In 2018, Mary earned $70,000 and Bill earned $135,000, in both cases W-2 wages. How much FICA tax were they required to pay for 2018?
-
Neon at 400 kPa, 20C is brought to 100C in a polytropic process with n = 1.4. Give the sign for the heat transfer and work terms and explain.
-
Consider a futures contract on mangoes that calls for the delivery of 2,000 pounds of the fruit three months from now. The spot price of mangoes is $2 per pound. The three-month riskfree rate is 2%....
-
What are stratified societies and what kinds of social systems are they identified with?
-
The sales, income from operations, and invested assets for each division of Winston Company are as follows Management has established a minimum rate of return for invested assets of 8%. Determine the...
-
1. Explain Amazon Inc free cash flow history. 2. What is normalization adjustment ? 3. What are three examples of balance sheet normalization adjustments that might appear on Amazon's balance sheet...
-
Build a form with two input elements and at least one button One input element is to get user's name The other input element is to get user's password Build a table that holds the following columns:...
-
Characterize the health care managers role in change management and assess the extent to which this has an impact on the success of the change process.
-
In an RLC series circuit driven by an AC source, the amplitude of the potential difference across the inductor is \(29.0 \mathrm{~V}\) and that across the capacitor is \(13.0 \mathrm{~V}\). If the...
-
A circuit contains a \(1.00 \times 10^{3}-\Omega\) resistor and a \(5.00 \times 10^{2}-\mathrm{mH}\) inductor in series. What is the impedance of the circuit when a \(1.00-\mathrm{kHz} \mathrm{AC}\)...
-
In an \(R C\) series circuit consisting of a \(20.0-\Omega\) resistor, a \(300-\mu \mathrm{F}\) capacitor, and an AC source, the source frequency is \(150 \mathrm{~s}^{-1}\). If the current has its...
-
An \(R L C\) series circuit has \(X_{C}=X_{L}=R\). When the circuit is operating at resonance, the current amplitude is 1. 0 A. When the angular frequency of the current is doubled, what is the new...
-
Founded by Jeff Bezos, online giant Amazon.com, Inc. (Amazon), was incorporated in the state of Washington in July, 1994, and sold its first book in July, 1995. In May 1997, Amazon (AMZN) completed...
-
Refer to Example 9.15. Add the following functionality to this program: Allow the user to enter the cost of a gallon of gas on each trip and use a function, Cost() to calculate the cost of purchasing...
-
Derive the expression for the complex frequency response of an undamped torsional system.
-
A single-story building frame is subjected to a harmonic ground acceleration, as shown in Fig. 3.57. Find the steady-state motion of the floor (mass \(m\) ). Figure 3.57:- 22 -x(t) m (!) - A cos cot...
-
Find the horizontal displacement of the floor (mass \(m\) ) of the building frame shown in Fig. 3.57 when the ground acceleration is given by \(\ddot{x}_{g}=100 \sin \omega t \mathrm{~mm} /...
Study smarter with the SolutionInn App