Question
Alpha Manufacturing has embarked on a post-audit review for one of their underperforming projects. The project required the firm to purchase specialised machinery 2 years
Alpha Manufacturing has embarked on a post-audit review for one of their underperforming projects. The project required the firm to purchase specialised machinery 2 years ago that cost $152415. The firm also had to pay an additional $10485 for delivery and installation. These costs were to be depreciated over 8 years to a $0 residual value. An initial increase of $78935 was also made in net working capital because of the project, as well as further increases of $11816 per annum. Due to the recent underperformance, Alpha Manufacturing is intending to terminate the project and sell the specialised machinery for $75110. The firm's marginal tax rate is 30 percent.
What is the termination cash flow of this project if the firm decides to liquidate the underperforming project today?
Step by Step Solution
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Step: 1
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