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Capital Budgeting Cash Flow Estimation: Please show me how to do the following by either using formulas and a Financial calculator. No excel. You, as
Capital Budgeting Cash Flow Estimation: Please show me how to do the following by either using formulas and a Financial calculator. No excel.
You, as the Vice President of Finance of Vegas Delivery.com, are evaluating the proposed acquisition of a new delivery truck. The new truck's basic price is $9o,ooo and the freight and modification costs amount to $10,ooo. Your company have spent $5,ooo last month as a non-refundable down payment on another truck from a different manufacturer but decided to cancel the order because you found out the truck under current consideration is a much better one The new truck would increase the company's revenues by $7o,ooo and also increase before-tax operating costs by $40,ooo per year. The new truck will be depreciated with the straight line method to zero value over 4 years. And you expect to sell the new truck at the end of year 4 for $30,000. There will be a one-time increase of net working capital of $30,ooo. Inaddition, Vegas will need to pay an additional $8,ooo annual interest payment for 4 yearsto finance the purchase of the truck. Vegas' tax rate is 30%. 1. What is the initial investment of this project? 2. Determine the after-tax operating cash flow associated with purchasing the new truck for year 4. 3. Determine the free cash flow associated with purchasing the new truck for year 4Step by Step Solution
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