Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company making plastic car parts buys new molding machines to expand its production capacity. The machines cost $3000000, with additional charges for delivery and

A company making plastic car parts buys new molding machines to expand its production capacity. The machines cost $3000000, with additional charges for delivery and installation totaling $31079. Employees will have to be trained to use the new machines, at the cost of $22381. With the increased production, accounts payable will go up by $44743, inventory by $42325, and accounts receivable by $66076 at the outset. These changes in the working capital will be recaptured at the end of the projects life of 5 years. The depreciable life of the machines is 10 years, and the company uses straight-line depreciation. The increased production will increase the sales revenue by $2000000 and the costs ,including depreciation, by $662756 per year in each of the next 5 years. The company expects to sell the machines after five years for $455656. The companys tax rate is 20% and its cost of capital is 14%. Compute terminal cashflow.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Makers And Takers The Rise Of Finance And The Fall Of American Business

Authors: Rana Foroohar

1st Edition

0553447238, 978-0553447231

More Books

Students also viewed these Finance questions

Question

What tools does the writer use to reinforce his position?

Answered: 1 week ago