Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Powaline Products, Inc. is considering introducing a new eliptical trainer, the NOVID-19, for the home market. The CFO of Powaline has assembled the following financial
Powaline Products, Inc. is considering introducing a new eliptical trainer, the NOVID-19, for the home market. The CFO of Powaline has assembled the following financial information about this new product Last month, Powaline Products hired a marketing company to conduct a survey of its current users to determine the potential market demand for a new product. Powoline received the marketing report last week along with a bill for $260,000 asking for payment in 10 days Powoline Products will need to spend $14,100,000 today to build a new factory to manufacture and assemble the NOVID-19. This investment will be depreciated on a straight-line basis to a $2,500,000 salvage value over 10 years. Powoline Products intends to sell the factory in 10 years for 52,500,000 Production of the NOVID-19 will require an immediate increase in not working capital of 53 500,000. This investment will be fully recovered at the end of the life of the project Revenue from sales of the NOVID-19 are expected to be $14,000,000 per year for each of the next 10 years The NOVID-19 is expected to decrease salon of other Poweline Products cliptical trainers by $1,000,000 per year for each of the next 10 years. Incremental direct costs to the entire company associated with producing and selling the NOVID-19 are estimated to be $6,000,000 per year for each of the next 10 years, Powaline Products' marginal tax rate is 20% Powaline Products' weighted average cost of capital (WACC) is 12%. Based on the information provided above, what is the annual operating net cash flow for year 2 (...CF2) for this project
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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