Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Calculating 'cash flows at the end' In Year zero, Freddys Farms (FFS) will purchase new machinery for $50,000. The tax office has specified that assets

Calculating 'cash flows at the end'

In Year zero, Freddys Farms (FFS) will purchase new machinery for $50,000. The tax office has specified that assets such as the new machinery purchased by FFS have an effective life of ten years.

In Year zero, this new machinery will require inventory to increase by $10,000, and accounts payable to decrease by $5,000 from the current figure of $20,000.

In Year zero, FFS agrees to sell the new machinery in five years time to an unrelated company for $20,000. In Year five, FFS will pay a dividend which totals $200,000.

For FFS internal management reports, a useful life of 15 years will be used to depreciate the new machinery. Assume the company tax rate is 30%.

What are the 'cash flows at the end'?

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

Makers And Takers The Rise Of Finance And The Fall Of American Business

Authors: Rana Foroohar

1st Edition

0553447238, 978-0553447231

More Books

Students also viewed these Finance questions