Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Project cash flow and NPV. The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a

Project cash flow and NPV.The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of

$4,000,000

and will be depreciated using a five-year MACRS life,

LOADING...

.

The sales manager has an estimate for the sale of the classic Thunderbirds. The annual sales volume will be as follows:

Year one:240

Year four:360

Year two:280

Year five:280

Year three:340

If the sales price is

$27,000

per car, variable costs are

$18,000

per car, and fixed costs are

$1,200,000

annually, what is the annual operating cash flow if the tax rate is

30%?

The equipment is sold for salvage for

$500,000

at the end of year five. Net working capital increases by

$600,000

at the beginning of the project (year 0) and is reduced back to its original level in the final year. Find the internal rate of return for the project using the incremental cash flows.

First, what is the annual operating cash flow of the project for year 1?

$00

(Round to the nearest dollar.)

What is the annual operating cash flow of the project for year 2?

$00

(Round to the nearest dollar.)

What is the annual operating cash flow of the project for year 3?

$00

(Round to the nearest dollar.)

What is the annual operating cash flow of the project for year 4?

$00

(Round to the nearest dollar.)

What is the annual operating cash flow of the project for year 5?

$00

(Round to the nearest dollar.)

Next, what is the after-tax cash flow of the equipment at disposal?

$00

(Round to the nearest dollar.)

Then, what is the incremental cash flow of the project in year 0?

$00

(Round to the nearest dollar.)

What is the incremental cash flow of the project in year 1?

$00

(Round to the nearest dollar.)

What is the incremental cash flow of the project in year 2?

$00

(Round to the nearest dollar.)

What is the incremental cash flow of the project in year 3?

$00

(Round to the nearest dollar.)

What is the incremental cash flow of the project in year 4?

$00

(Round to the nearest dollar.)

What is the incremental cash flow of the project in year 5?

$00

(Round to the nearest dollar.)

So, what is the IRR of the project?

00%

(Round to two decimal places.)

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

Derivatives And Internal Models

Authors: Hans Peter Deutsch, Mark W. Beinker

5th Edition

3030229017, 9783030229016

More Books

Students also viewed these Finance questions

Question

How can a convenience store become a destination retailer?

Answered: 1 week ago