Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet demand for a new line of solar charged motorcycles (who wants

image text in transcribed
Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet demand for a new line of solar charged motorcycles (who wants to ride on a cloudy day anyway?) The proposed project has the following features; The firm just spent $300,000 for marketing study to determine consumer demand (@t=0). Aero Motorcycles purchased the land the factory will be built on 5 years ago for $2,000,000 and owns it outright (that is, it does not have a mortgage). The land has a current market value of $2,600,000. . The project has an initial cost of $26,934,548 (excluding land, hint: land is not subject to depreciation). If the project is undertaken, the company will realize an additional $8,000,000 in sales over each of the next ten years. (i.e. sales in each year are $8,000,000) The company's operating cost (not including depreciation) will equal 50% of sales. The company's tax rate is 35 percent. Use a 10-year straight-line depreciation schedule. At t = 10, the project is expected to cease being economically viable and the factory (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase price). . The project's WACC = 10 percent Assume the firm is profitable and able to use any tax credits (i.e. negative taxes). What is the project's outflow at t=0? Answer to the nearest whole dollar value

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

Personal Finance

Authors: Jeff Madura

4th Edition

0136117007, 9780136117001

More Books

Students also viewed these Finance questions

Question

6. What do long, slow waves on an EEG indicate?

Answered: 1 week ago