Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Extremely Wild Wings (EWW) is considering introducing a new level of super hot wings called 911 Wings. The 911 Wings would require a special prepartion

Extremely Wild Wings (EWW) is considering introducing a new level of super hot wings called 911 Wings. The 911 Wings would require a special prepartion process and new equipment. The cost of the new equipment is $50,000 and falls into the 3-Year MACRS Depreciation Class (yr 1: 33%, yr 2: 45%, yr 3: 15%, yr 4: 7%) and would require an increase in net working capital of $3,000. The expected life of the project is 3 years. EWW has already spent $1,500 on a marketing analysis that shows that sales would increase $40,000 in year 1 of the project, $30,000 in year 2, and $18,000 in year 3. Additional operating costs other than depreciation will be 25% of sales. The expected salvage value at the end of the projects 3 year life is $10,000 and any increases in net working capital during the life of the project will be recovered or liquidated at the end of the projects expected life. The companys marginal tax rate is 40% and the company will have enough other taxable income to more than offset any taxable losses from the 911 Wings project. EWWs WACC is 10%.

11) What is the year 1 operating cash flow for the 911 Wings project?

A.$23,940 B.$24,600 C.$25,800 D.$24,996 E.$8,100

The answer is B. Please Show ALL WORK in Explanation please

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forward Lease Sukuk In Islamic Capital Markets Structure And Governing Rules

Authors: Ahcene Lahsasna , M. Kabir Hassan , Rubi Ahmad

1st Edition

3319942611,331994262X

More Books

Students also viewed these Finance questions

Question

Answered: 1 week ago

Answered: 1 week ago