The table below offers EBIT for a potential capital investment for Fake Company Zeta. (This same project
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Question:
The table below offers EBIT for a potential capital investment for Fake Company Zeta. (This same project will be used for all of your FMC #3 work.) You should be able to determine a few things once you consider the following:
- The initial investment is $20,000.
- Depreciation is straight line over four years.
- The company's WACC is estimated at 9.25%.
- Company analysts estimate that a proper salvage value at the end of the project life of four years is 30% of the initial investment.
- The company's tax rate is 30.0%.
YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | |
EBIT | $(1,750) | $325 | $1,025 | $3,700 |
What is this project's net incremental cash flow in Year 2?
Related Book For
Managerial Economics
ISBN: 978-0133020267
7th edition
Authors: Paul Keat, Philip K Young, Steve Erfle
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