Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

American Foods ( AF ) wants to increase its operating efficiency by installing a new inventory management system. The system requires an investment in equipment

American Foods (AF) wants to increase its operating efficiency by installing a new inventory management system. The system requires an investment in equipment of $19,616 today. The equipment will be depreciated on a straight line basis to a value of zero over a five year life. The first depreciation charge will be recognized one year from now (at Year 1). The system will allow AF to reduce its inventory levels one year from now by $2,953. The system is expected to increase AF's revenue by $27,150 each year. Annual pre-tax expense of $12,716 is required to run the system. If the company's tax rate is 33%, what is the incremental free cash flow for the system one year from now (at Year 1)?

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

Money And Capital Markets

Authors: Peter Rose, Milton Marquis

10th Edition

0077235800, 9780077235802

More Books

Students also viewed these Finance questions

Question

Draw and define the three types and sub types of Trade Cycle.

Answered: 1 week ago

Question

2. Answer the question, Who should do the appraising?pg 87

Answered: 1 week ago

Question

1. Explain the purpose of performance appraisal.pg 87

Answered: 1 week ago