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$140,000. A new building will cost $150,000 and will be depreciated on a straight-line basis over 10 years to a salvage value of $0. Actual
$140,000. A new building will cost $150,000 and will be depreciated on a straight-line basis over 10 years to a salvage value of $0. Actual land salvage at the end of 10 years is expected to be $240,000. Actual building salvage at the end of 10 years is expected to be $190,000. Equipment for the facility is expected to cost $230,000. Installation costs will be an additional $40,000 and shipping costs will be $8,000. This equipment will be depreciated as a 7-year MACRS asset. Actual estimated salvage at the end of 10 years is $0. The project will require net working capital of $60,000 initially (year 0), an additional $45,000 at the end of year 1 , and an additional $45,000 at the end of year The project is expected to generate increased EBIT (operating income) for the firm of $90,000 during year 1 . Annual EBIT is expected to grow at a rate of 7 percent per year until the project terminates at the end of year 10. The marginal tax rate is 40 percent. Use Table 9A3 and Table I to answer the questions below. Round your answers to the nearest dollar. Compute the initial net investment. Compute the annual net cash flow from the project in year 10
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