Question
Consider the following for questions 4448: A new product is being considered by Stanton Corp.An outlay of $40,000 is required for equipment and an additional
Consider the following for questions 4448: A new product is being considered by Stanton Corp.An outlay of $40,000 is required for equipment and an additional net working capital investment of $1000 is required.The project is expected to have a 4 year life and the equipment will be depreciated on a straight line basis (equal annual amount) to a $4,000 book value.
Producing the new product will reduce current manufacturing expenses by $5,000 annually and increase earnings (revenue) before depreciation and taxes by $6,000 annually.Stanton's marginal tax rate is 40 percent.Stanton expects the equipment will have a market salvage value of $10,000 at the end of 4 years. Question: Regardless of your answer to number 46 & 47 above, ASSUME the project's aftertax operating cash flow during years 14 from the machine = $8,000 and the after tax salvage value = $7,000. What is the TOTAL cash flow expected from this project in the terminal year, including any initial investment amounts assumed to be recovered? Include all terminal year flows as well as the terminal year operating cash flow of 8,000 assumed.
7,000
8,000
15,000
16,000
none of the above
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