Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Aunt Sally's Sauces Inc., is considering expansion into a new line of all-natural, cholesterolfree, sodium-free, fat-free, low-calorie tomato sauces. Sally has paid $12,000 for a
Aunt Sally's Sauces Inc., is considering expansion into a new line of all-natural, cholesterolfree, sodium-free, fat-free, low-calorie tomato sauces. Sally has paid $12,000 for a marketing study which indicates that the new product line would have sales of $790,000 per year for the next six years. Manufacturing plant and equipment would cost $600,000 and will be depreciated using the following annual depreciation rates: 0.2,0.32,0.1920,0.1152,0.1152, 0.0576. The fixed assets will have no market value at the end of six years. Annual fixed costs are projected at $80,000 and variable costs are projected at 53% of sales. Net operating working capital requirements are $75,000 for the six-year life of the project; the outlay for working capital will be recovered at the end of six years. Aunt Sally's tax rate is 25% and the firm requires a 14% return. The projected Free Cash Flow(FCF) in the first year is $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started