Question 40 (2.5 points) Listen Based on the information listed below concerning a capital budgeting project, the total cash flow In year 25 for this project is $ . Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. The ECU-9 will cost $4 million. . The equipment will be depreciated straight-line over 25 years to a salvage value of $400,000 and sold for that amount in 25 years. If purchased the ECU-9 will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project. The marginal tax rate is 25%. The cost of capital is 13.00%. . 1) 1,206,000 Page 2 If purchased the ECU-9 will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project The marginal tax rate is 25% The cost of capital is 13.00% Page 3 3 1) 1.206,000 O2) 1,186,000 are 4: 3) 1,216,000 5: 4) 9,836,000 5) 1,036,000 Previous Page Next Page Page 40 of 41