Question
Blaze Scooters is considering expanding into a new college town and has the following operating data: Initial Investment in scooters (year 0): $100265 Cost of
Blaze Scooters is considering expanding into a new college town and has the following operating data:
Initial Investment in scooters (year 0): $100265
Cost of securing permits (assume that permit cost is a tax-deductible expense in year 1): $10117
Anticipated Revenue: $230569 for years 1-5.
Depreciation of scooters - straight line down to 0 over 5 years.
Operating expenses (not including Depreciation): $76056 per year.
Tax Rate: 17%.
Net Working Capital, consisting of cash, spare parts inventory, accounts receivable, and accounts payable: $30707. Blaze expects to be able to recoup 100% of Net Working if they shut down. Assume that investment in working capital occurs in year 0 at the start of the project.
Scrap value of scooters at the end of 5 years: $24874. (remember that any capital gains when selling are taxable)
Assume that Blaze makes the necessary investments, operates for 5 years, and then shuts down, selling the scooters for scrap and recouping Net Working Capital. What are their expected after-tax cash flows for year 5 rounded to the nearest cent (.01)?
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