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 total

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

$4,400,000

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:370

Year two:300

Year five:310

Year three:340

If the sales price is

$28,000

per car, variable costs are

$19,000

per car, and fixed costs are

$1,100,000

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.

Year 3-Year 5-Year 7-Year 10-Year 1 33.33% 20.00% 14.29% 10.00% 2 44.45% 32.00% 24.49% 18.00% 3 14.81% 19.20% 17.49% 14.40% 4 7.41% 11.52% 12.49% 11.52% 5 11.52% 8.93% 9.22% 6 5.76% 8.93% 7.37% 7 8.93% 6.55% 8 4.45% 6.55% 9 6.55% 10 6.55% 11 3.28%

annual operating cash flow of the project for year 1,2,3,4,5,6,7,8,9,and 10?

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_2

Step: 3

blur-text-image_3

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

Empirical Techniques In Finance

Authors: Ramaprasad Bhar, Shigeyuki Hamori

1st Edition

3642064175, 978-3642064173

More Books

Students also viewed these Finance questions

Question

Prepare an electronic rsum.

Answered: 1 week ago

Question

Strengthen your personal presence.

Answered: 1 week ago

Question

Identify the steps to follow in preparing an oral presentation.

Answered: 1 week ago