Question
Needle and Thread Inc. is considering expanding one of its production facilities to bulld a new line of sewing kits. The project would require a
Needle and Thread Inc. is considering expanding one of its production facilities to bulld a new line of sewing kits. The project would require a $850,000 capital investment and will be equally depreciated (straight line) over its 4 year life. They belleve they can strage $250,000 for the equipment at the end of the project. Incremental sales are expected to be $1,000,000 annually for the 4 year period with cash operating expenses of 438 of sales. The compary would also have to commit initial working capital to the project of $700,000. The company is subject to a marginal tax rate of 304 and investors require a 10% return on projects with a similar risk.
What is the terminal cash flow in year 4 (FCF in Year 4)?
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