Question
These are all part of the same question Consider the following capital budgeting and cash flow estimation problem. You have developed a new energy drink
These are all part of the same question
Consider the following capital budgeting and cash flow estimation problem. You have developed a new energy drink that uses various vegetables. The drink is called V-DRINK. You have an existing building that you are using to produce V-DRINK. The building is fully depreciated. You determine a need to buy $400,000 in equipment. Shipping and installation is an additional $50,000. Additionally you determine you will need to have $14,257 in inventory. What is the total initial outlay associated with the project?
The equipment cost (equipment plus shipping and installation) can be depreciated at the rate of 21% the first year. The remaining 5 years (years 2-6) the depreciation will be equal to $30,000 per year. What is the amount of depreciation in year 1?
Based on some market research you expect to sell around 200,000 bottles of V-Drink a year at wholesale price of $2.7. Operating costs (excluding depreciation) are expected to be 50% of revenue. The firms tax rate is 40%. What is the annual operating cash flow associated with this project in year 2. (Note you will need to factor in $30,000 in depreciation in year 2 from the prior question).
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