TrumpTreats, a maker of candy that resembles the current President, is considering opening up a kiosk outside
Question:
TrumpTreats, a maker of candy that resembles the current President, is considering opening up a kiosk outside the Trump Tower on 5thAvenue. The project will require an investment of $45,000 in equipment and $20,000 in net working capital to get started. The net working capital will be recovered at the end of the project, and the equipment will have no salvage value (it will just be thrown away at the end). The equipment will be depreciated on a straight-line basis over the three year life of the project. Incremental revenues will be $75,000 in year one, $80,000 in year two, and $85,000 in year three. Incremental expenses will be $50,000 per year in each of the three years. The tax rate is 40%.
Calculate the initial net investment and the net after-tax cash flows of the project for each year.
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen