Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Poulsen Industries is analyzing a proposed new project. The number of units that will be sold will be constant each year. The sales price for

image text in transcribed
Poulsen Industries is analyzing a proposed new project. The number of units that will be sold will be constant each year. The sales price for year 1 is expected to equal $25/unit but is expected to increase each year thereafter at an inflation rate of 4%. Fixed costs will also be constant each year, but variable costs per unit will also increase at the inflation rate of 4% each year after year 1. The project will last for 3 years. Under the new tax law, the equipment for the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. Compute the after-tax cash flow for year 2 of the project. Do not round the intermediate calculations and round the final answer to the nearest whole number WACC 10.0% Equipment cost $200,000 Units sold each year 54,000 Average price per unit, Year 1 $25.00 Fixed op. cost excl. depr. (constant) $150,000 Variable op. cost/unit, Year 1 $20.20 Expected annual inflation rate 4.0% Tax rate 25.0% $89,676 O $85.176 O $127.176 $52,176 $81.900

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Elementary Statistics

Authors: Robert R. Johnson, Patricia J. Kuby

11th Edition

978-053873350, 9781133169321, 538733500, 1133169325, 978-0538733502

Students also viewed these Finance questions