Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help ive posted and its been wrong twice Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand

please help ive posted and its been wrong twice image text in transcribed
image text in transcribed
Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles (who wants to ride on a cloudy day anyway?) The proposed project has the following features; - The firm just spent $300,000 for a marketing study to determine consumer demand (@t=0). - Aero Motorcycles purchased the land the factory will be built on 5 years ago for $2,000,000 and owns it outright (that is, it does not have a mortgage). The land has a current market value of $2,600,000. - The project has an initial cost of $20,000,000 (excluding land, hint: the land is not subject to depreciation). - If the project is undertaken, at t=0 the company will need to increase its inventories by $3,500,000, accounts receivable by $1,500,000, and its accounts payable by $2,000,000. This net operating working capital will be recovered at the end of the project's life (t=10). - If the proje t is undertaken, the company will realize an additional $8,000,000 in sales over each of the next ten years. (i.e. sales in each year are $8,000,000 ) - The company's operating cost (not including depreciation) will equal 50% of sales. - The company's tax rate is 35 percent. - Use a 10-year straight-line depreciation schedule. - At t=10, the project is expected to cease being economically viable and the factory (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase price). - The project's WACC = 10 percent - Assume the firm is profitable and able to use any tax credits (i.e. negative taxes). What is the operating cash flow @ t=1 ? Round to nearest whole dollar value. Grill Master Johnnys is thinking about purchasing a new, energy-efficient grill. The grill will cost $53,000.00 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $11,750.00. The grill will have no effect on revenues but will save Johnny's $23,500.00 per year in energy expenses. The tax rate is 40%. The 3 -year MACRS schedule; What is the total cash flow in year 3

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

Value Investing

Authors: Mike Hartley

1st Edition

979-8864443309

More Books

Students also viewed these Finance questions