Question
Calculating 'cash flows at the end' The following information relates to KLC Corporation (KLC): Today (Year zero), KLC is evaluating whether to purchase a new
Calculating 'cash flows at the end'
The following information relates to KLC Corporation (KLC):
Today (Year zero), KLC is evaluating whether to purchase a new ski lift to operate in the nearby mountains. KLC currently has two other ski lifts. Tickets for each ski lift will be sold separately and can only be used for the ski lift it was purchased for. The third ski lift costs $4,700,000 and the ski lift project is expected to last 15 years. KLC has already agreed to sell the ski lift in 15 years to an unrelated firm for $2,700,000. In Year 0, the new ski lift will increase inventory for KLC from $190,000 to $280,000. KLC also anticipates that accounts payable for the new ski lift will immediately increase by $154,000. The Australian Tax Office states the ski lift should be depreciated to zero over a 25-year life. KLC is expecting the ski lift will be very popular and the company anticipates paying a one-off special dividend to shareholders of $1,500,000 at the end of the project. Assume the company tax rate is 30%.
What are the 'cash flows at the end'?
[Describe and list each cash flow and the corresponding amount on a new line separately, as in lecture and tutorial examples.]
[You must show your working out, otherwise, you will be penalised]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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