Question
Master Minds Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $1.2 million. The fixed asset will be
Master Minds Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $1.2 million. The fixed asset will be depreciated using MACRS and it falls into the 3-year class. The project is estimated to generate $1,600,000 in annual sales, with costs of $400,000. The tax rate is 35% and the required rate of return for Master Minds is 15%.
11. What is the depreciation tax shield for year 1?
12. What is the OCF for year 1?
13. What is the book value of the fixed assets at the end of the project (year3)?
14. If they sell the fixed assets for $200,000 at the end of year three, what will be the after-tax cash in-flow to Master Minds, Inc from the sale?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started