Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fit Factory is considering an investment of $375,000.00 in an asset with an economic life of five years. The firm estimates that the annual revenues

Fit Factory is considering an investment of $375,000.00 in an asset with an economic life of five years. The firm estimates that the annual revenues and expenses at the end of the first year will be $210,000.00 and $66,000.00, respectively. Both revenues and expenses will grow at an annual rate of 3 percent. Fit Factory will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is estimated to be $44,000.00 at that time. The one-time net working capital investment of $19,000.00 is required immediately and will be recovered at the end of the project. All corporate cash flows are subject to a 34 percent tax rate.

a. What is the net operating income (NOI) from this project in Year 3?

ANSWER : Answer

b. What is the after-tax proceeds from selling this asset at the end of the project?

ANSWER : Answer

c. The net operating income at the end of the project is $87,073.27, what is the free cash flow from this project in that year?

ANSWER : Answer

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

Contemporary Financial Management

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

10th Edition

978-0324289114, 0324289111

More Books

Students also viewed these Finance questions

Question

Write each fraction as a percent. 7 50

Answered: 1 week ago