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Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar - charged motorcycles
Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solarcharged motorcycles who wants to ride on a cloudy day anyway? The proposed project has the following features;
The firm just spent $ for a marketing study to determine consumer demand @
Aero Motorcycles purchased the land the factory will be built on years ago for $ and owns it outright that is it does not have a mortgage The land has a current market value of $
The project has an initial cost of $oexcluding land, hint: the land is not subject to depreciation
If the project is undertaken, at the company will need to increase its inventories by $ accounts receivable by $ and its accounts payable by $ This net operating working capital will be recovered at the end of the project's life
If the project is undertaken, the company will realize an additional $ in sales over each of the next ten years. ie sales in each year are $
The company's operating cost not including depreciation will equal of sales.
The company's tax rate is percent.
Use a year straightline depreciation schedule.
At the project is expected to cease being economically viable and the factory including land will be sold for $assume land has a book value equal to the original purchase price
The project's WACC percent
Assume the firm is profitable and able to use any tax credits ie negative taxes
What is the operating cash flow @ Round to nearest whole dollar value.
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