Question: The ABC Co. is analyzing a project that has projected sales of $189,400 and costs of $ 102,300. The project requires an investment in inventory
The ABC Co. is analyzing a project that has projected sales of $189,400 and costs of $ 102,300. The project requires an investment in inventory of $15,000. Fixed assets of $80,000 are needed and will be depreciated using the MACRS three year class. Accounts payable will increase by $36,000. The increases in inventory and account payable Will 1333.113;ngan to normal at the end of the project's life. An interest expense of $1 1 ,000 will be incurred annually. The project has a life of 3 years. At the end of the three years, the equipment has a salvage value of $26,000. The company requires a 10% rate of return. The tax rate is 34%. 9- What is the total cash ow in year 0? A) $59,000 B) $72,000 C) -$87,000 D) $95,000 E) $103,000 10- What is the total cash ow in year 1? A) $56,176 B) $61,517 C) $66,552 D) $69,574 E) $37,693 11- What is the annual cash ow in year 3? A) $59,693 B) $61,517 C) $66,552 D) $77,603 E) $86,214
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