Question
Consider a project with a 4-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to
Consider a project with a 4-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project and there is no salvage value. The required return is 16% and the tax rate is 34%.
You've collected the following estimates:
| Base case | Pessimistic | Optimistic | |
| Unit sales per year (Q) | 8,000 | 6,000 | 10,000 |
| Price per unit (P) | 50 | 40 | 60 |
| Variable cost per unit (VC) | 20 | 35 | 15 |
| Fixed costs per year (FC) | 30,000 | 50,000 | 20,000 |
What is the annual incremental cash flow in the base case?
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Financial Reporting Financial Statement Analysis And Valuation
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
10th Edition
0357722094, 978-0357722091
