Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(Calculating free cash flows) Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in
(Calculating free cash flows) Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in inventory will decline due to increased efficiencies in getting inventory to showrooms. As a result of this new distribution center, Spartan expects a change in EBIT of $900,000. Although inventory is expected to drop from $87,000 to $65,000, accounts receivables are expected to climb as a result of increased credit sales from $80,000 to $130,000. In addition, accounts payable are expected to increase from $70,000 to $90,000. This project will also produce $250,000 of bonus depreciation in year 1 and Spartan Stores is in the 32 percent marginal tax rate. What is the project's free cash flow in year 1
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