Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help with both questions! The following table tracks the main components of working capital over the life of a four-year project. 2023 Accounts receivable
Please help with both questions!
The following table tracks the main components of working capital over the life of a four-year project. 2023 Accounts receivable Inventory Accounts payable 2019 0 82,000 28,500 2020 164,000 137,000 53,500 2021 239,000 137,000 57,000 2022 204,000 102,000 38,500 OOON Calculate net working capital and the cash inflows and outflows due to investment in working capital. (Negative answers should be indicated by a minus sign.) 2019 2020 2021 2022 2023 Net working capital Cash flows A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,700 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 11%. Ignore inflation. a. Calculate project NPV for each company. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) NPV Company A Company B b. What is the IRR of the after-tax cash flows for each company? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal places.) IRR Company A Company BStep 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