Question
5. You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two
5. You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $100,000, and if you sold it today, you would net $115,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $30,000 plus an initial investment of $5,000 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?
6. Phone Home, Inc. will purchase a fixed asset for $4.2 million and depreciate it straight-line to zero over its three year life. The asset will generate $3,100,000 in annual sales with costs of $990,000 (excluding depreciation). The tax rate is 35 percent. Calculate operating cash flow.
7. You purchased a machine for $1.5 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $700,000, what is your after-tax cash flow from selling the machine?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started