Question
Coffee-Cola is considering a project for a new bottled beverage called Lots-A-Latte. The project would require new assets today costing $320,000 that would be depreciated
Coffee-Cola is considering a project for a new bottled beverage called Lots-A-Latte. The project would require new assets today costing $320,000 that would be depreciated using 3-year MACRS Depreciation (yr 1: 33%, yr 2: 45%, yr 3: 15%, yr 4: 7%). Additional net working capital of $15,000 would be needed at the beginning of the projects life and would be recovered at the end of the project. The project has a 3-year expected useful life with an expected salvage value of $90,000 at the end of the 3-year expected useful life. Coffee-Cola expects annual sales of $250,000 and annual operating costs of $110,000 during the 3-year life of the project. Coffee-Colas marginal tax rate is 25% and their WACC is 8% Refer to Coffee-Cola, what is the terminal (non-operating) cash flow at the end of year 3 for the Lots-A-Latte project?
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