Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

FAR Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $150,000. The cost of shipping and installation is

image text in transcribed
FAR Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $150,000. The cost of shipping and installation is an additional $15,000. The asset will fall into the 3-year MACRS class. The year 1-4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $300,000 per year. Cost of goods sold will be 80% of sales. The project will require an increase in net working capital of $15,000. At the end of three years, FAR plans on ending the project and selling the manufacturing equipment for $35,000. The marginal tax rate is 40% and FAR Corporation's appropriate discount rate is 12%. What is the operating cash flow for year 1? What is the operating cash flow for year 2? What is the operating cash flow for year 3

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_2

Step: 3

blur-text-image_3

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

Methods And Finance

Authors: Emiliano Ippoliti, Ping Chen

1st Edition

3319498711, 978-3319498713

More Books

Students also viewed these Finance questions