Question
please help with excel and please show formulas XYZ Corporation is considering an expansion project. To date, they have spent $618 investigating the viability of
please help with excel and please show formulas
XYZ Corporation is considering an expansion project. To date, they have spent $618 investigating the viability of the project and have decided to proceed. The CEO of XYZ spent $230 last year on his business trip to New York where he discussed the proposed new project with the board members. The company spent $500 on a marketing study before its current analysis regarding whether to accept or reject the project. The proposed project will cost $970.00. It will also cost additional $219.00 for shipping and installation. The project will be depreciated over a 3 year MACRS class life. XYX would use the 3-year MACRS method to depreciate the machine and equipment which are 33.33%, 44.45%, 14.81%, and 7.41%. 3
If the project is undertaken the company will need to increase its inventories by $415, and its accounts payable will rise by $118. The company will realize an additional $770.00 in sales over each of the next three years. The companys operating costs (not including depreciation) will increase by $357.00 a year. Both sales and operating costs are expected to grow 3.95% annually during the life of the project. The companys tax rate is 35.00%. At t = 3, the projects economic life is complete, but it will have a salvage value (before-tax) of $850.00 after three years. The projects WACC is 9.25%. What is the depreciable cost basis for the project? What is the initial cash outlay for the project? What is the depreciation for year 3? (Ans - Cost basis: $1,189), (Ans - Initial Outlay: 1486) (Ans - Year 3 Depreciation: $ 176.09)
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