Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help ASAP AAA Corp currently has one product, high-priced lawn mowers. AAA Corp, has decided to sell a new line of medium-priced lawn mowers.

please help ASAP
image text in transcribed
image text in transcribed
AAA Corp currently has one product, high-priced lawn mowers. AAA Corp, has decided to sell a new line of medium-priced lawn mowers. The building and machinery for producing this new line is estimated to cost $11,000,000 and it will be depreciated down to zero over 10 years using straight-line depreciation. Also an investment today on working capital in the amount of $4,000,000 is needed. The working capital will be recovered at the end of the project Sales for the new line of lawn mowers are estimated at $17 million a year. Annual variable costs are 60% of sales. The project is expected to last 5 years. In addition to the production variable costs, the fixed costs each year will be $4,000,000. The company has spent $1,000,000 in a marketing study that determined the company will lose $9 million in sales a year of its existing high-priced lawn mowers. The production variable cost of those sales is $7 million a year, it is expected that at the end of the project, the building and machinery can be sold for $8,000,000. The tax rate is 20 percent and the cost of capital is 12% a. What is the initial outlay (10) for this project? The Initial Outlay is $(Round your answer to the nearest dollar- no decimals - and commas are required to separate thousands and millions. Use negative sign for negative cash flows - do not use parenthosis) b. What is the operating cash flows (OCF) for each of the years for this project? The OCF for each year of the project are $ (Round your answer to the nearest dollar - no decimals - and commas are required to separate thousands and millions) c. What is the termination value (TV) cash flow (aka recovery cost or atter-tax salvage value, or liquidation value of the assets) at the end of the project? The termination value at the end of the project is $(Round your answer to two the nearest dollar - no decimals - and commas are required to separate thousands and millions) d. What is the NPV of this project? The NPV of this project is $. (Round your answer to the nearest dollar - no decimals and commas are required to separate thousands and million. Use negative sign for negative cash flows - do not use parenthesis)

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

The Handbook Of Portfolio Mathematics

Authors: Vince

1st Edition

0471757683, 978-0471757689

More Books

Students also viewed these Finance questions

Question

11. Are your speaking notes helpful and effective?

Answered: 1 week ago

Question

The Goals of Informative Speaking Topics for Informative

Answered: 1 week ago