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An ice-cream company has a new business idea: specially equipped ice-cream trucks can deliver the company's ice-creams to customers' homes and create custom ice-cream
An ice-cream company has a new business idea: specially equipped ice-cream trucks can deliver the company's ice-creams to customers' homes and create custom ice-cream flavors right there. Seems like $750,000 would need to be invested right away to buy the right delivery trucks. This project would be tested for 9 years, and at the end of the project all used trucks will be sold and bring the company estimated $240,000 in the after-tax salvage value. The company would also need to set aside $25,000 in cash right away to cover any unforeseen future repairs, and additional $5,000 would be added each year to this cash reserve. The cash reserve will be recovered at the end of the project. The company expects that $150,000 would be generated each year as the operating cash flow. If the company doesn't take any loan, the required return on this project will be 13%, and it'll be used to discount all future estimated cash flows. If the company does take a loan, it will be an interest-only loan, at 5.0% annual rate, and it will be used to pay for 70% of the initial investment such as the delivery trucks. Calculate unlevered cash flows for this project. Signs are important! Year 0 cash flow - $ [Select] . Cash flow in the intermediate year (for each year) = $ Cash flow in the final year $ [Select] [ Select]
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