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The financial manager of G. F. Booth Company is evaluating a proposed capital project with a delivered price of $125,000. Installation of the project.will cost
The financial manager of G. F. Booth Company is evaluating a proposed capital project with a delivered price of $125,000. Installation of the project.will cost $15,000. As a result of the project, the company's inventory will rise $20,000 and its accounts payable will rise $10,000. The company has already spent $2,000 on search costs, trying to identify reputable vendors of the project. The financial manager expects the project to terminate at the end of 3 years, at which time the net working capital will be recovered, and the depreciable assets will be sold for $25,000. For tax purposes, the class life of the project is 3 years, and the financial manager will use the MACRS procedure to calculate depreciation expense. ult of the project. In Booth's sales revenue will increase by $200,000 per year as a addition, the proposed project will cause a $10,000 per year drop in cash expenses associated with an existing project. Direct cash expenses per year associated with the proposed project are $100,000. The company's marginal tax rate is 34 percent. Calculate Booth's net investment cash outflow for the proposed project. Calculate the annual depreciation expense associated with the proposed project. Calculate the annual incremental cash inflows attributable to the proposed project Calculate the project-disposal cash flow. . . . D. The financial manager of G. F. Booth Company is evaluating a proposed capital project with a delivered price of $125,000. Installation of the project.will cost $15,000. As a result of the project, the company's inventory will rise $20,000 and its accounts payable will rise $10,000. The company has already spent $2,000 on search costs, trying to identify reputable vendors of the project. The financial manager expects the project to terminate at the end of 3 years, at which time the net working capital will be recovered, and the depreciable assets will be sold for $25,000. For tax purposes, the class life of the project is 3 years, and the financial manager will use the MACRS procedure to calculate depreciation expense. ult of the project. In Booth's sales revenue will increase by $200,000 per year as a addition, the proposed project will cause a $10,000 per year drop in cash expenses associated with an existing project. Direct cash expenses per year associated with the proposed project are $100,000. The company's marginal tax rate is 34 percent. Calculate Booth's net investment cash outflow for the proposed project. Calculate the annual depreciation expense associated with the proposed project. Calculate the annual incremental cash inflows attributable to the proposed project Calculate the project-disposal cash flow. . . . D
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