Question: Thornley Co. is considering a 3-year project with an initial cost of $587,000. The project will not directly produce any sales but will reduce operating

Thornley Co. is considering a 3-year project with an initial cost of $587,000. The project will not directly produce any sales but will reduce operating costs by $265,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $295,000. The tax rate is 34 percent and the required return is 9 percent. An extra $23,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3?

$491,782.87

$496,208.19

$514,782.87

$519,208.19

$523,008.24

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 Finance Questions!

Q:

1) You are looking at three mutually exclusive projects. All three projects have 3 years life span and require the same $20,000 initial investment. Project A is expected to generate $20,000, $2,000,...

Q:

1. A firms capital structure refers to the firms: mixture of various types of production equipment. investment selections for its excess cash reserves. combination of cash and cash equivalents....

Q:

1. A firms capital structure refers to the firms: mixture of various types of production equipment. investment selections for its excess cash reserves. combination of cash and cash equivalents....

Q:

Thornley Machines is considering a 3-year project with an initial cost for fixed assets of $618,000. The project will reduce operating costs by $265,000 a year. The equipment will be depreciated...

Q:

Thornley Machines is considering a 3-year project with an initial cost for fixed assets of $618,000. The project will reduce operating costs by $265,000 a year. The equipment will be depreciated...

Q:

Thornley Machines is considering a 3-year project with an initial cost for fixed assets of $618,000. The project will reduce operating costs by $265,000 a year. The equipment will be depreciated...

Q:

You are working on a bid to build four small apartment buildings a year for the next three years for a local community.This project requires the purchases of $900,000 of equipment which will be...

Q:

Thornley Co . is considering a 3 - year project with an initial cost of $ 6 3 6 , 0 0 0 . The equipment is classified as MACRS 7 - year property. The MACRS table values are 0 . 1 4 2 9 , 0 . 2 4 4 9...

Q:

Thornley Co . is considering a 3 - year project with an initial cost of $ 6 3 6 , 0 0 0 . The equipment is classified as MACRS 7 - year property. The MACRS table values are 0 . 1 4 2 9 , 0 . 2 4 4 9...

Q:

Thornley Co . is considering a 3 - year project with an initial cost of $ 6 3 6 , 0 0 0 . The equipment is classified as MACRS 7 - year property. The MACRS table values are 0 . 1 4 2 9 , 0 . 2 4 4 9...

Q:

Projected sales for a tent manufacturer are $510,000. Each tent sells for $850 and requires $350 of variable costs to produce. The tent manufacturers total fixed costs are $145,000. What is the tent...

Q:

The chairman of the Federal Reserve Board announces that over the next year, the rate of money growth will be reduced from its current rate of 10% to a rate of 2%. If the chairman is believed by the...

Q:

What is meant by a p-value?

Q:

10) For a bond that pays cash interest (i.e., not a zero coupon bond), YTM is (a) always equal to the coupon rate (b) always equal to the current yield (c) is always less than the coupon rate (d) can...

Q:

4. Multinational Labor Organizations. Search for the history and mission statements for the following organizations: International Federation of Airline Pilots Association (IFALPA) International...

Q:

4. What are the five special features of the Japanese system? Why havent these features been widely adopted in the United States?

Q:

3. Guidelines for Multinational Corporations. The guidelines for Multinational Enterprises established by the Organization for Economic Cooperation and Development and presented on the OECD Web site...