home / study / business / finance / questions and answers / thomson media is considering some new equipment ...

Your question has been answered

Let us know if you got a helpful answer. Rate this answer

Question: Thomson Media is considering some new equipment wh...

Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life.

What is the projects oberating cash flow in 2 years?

What is the projects total cash flow in year 3?

What is the projects NPV?

What is the projects net investment required at t=0?

make sure to create a table and write down the numbers in the approproate lines in addition to providing the answer. Please do not use excel.

Net investments in fixed assets $70,000

Required net operating working captial 10,000

Depriciation (MACRS)

33% in year 1

45% in year 2

15% in year 3

7% in year 4

Earnings before taxes & depriciation $45,000

Expected pre-tax & depriciation $5,000

tax rate 35%

WACC 10%