Question
#11. A proposed capital expenditure project that will involve purchasing new equipment costing $40,000 with an additional $2,000 charge for delivery. Installation of the equipment
#11. A proposed capital expenditure project that will involve purchasing new equipment costing $40,000 with an additional $2,000 charge for delivery. Installation of the equipment is expected to be $5,000. The equipment has an expected life of 6yrs and an estimated salvage value of $20,000. The proposed project will require an additional working capital investment of $10,000. Revenues for the project are forcasted to increase $30,000 per year and cash expenses are expected to be $10,000 per year. The firm has a 35% marginal tax rate and has a 10% weighted average cost of capital. Annual depreciation is expected to increase by $7833.33 per yr, assuming simplified straight line depreciaition. Calculate the one time end of project cash flows from this proposed project.
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