Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information). A kiteboarding company

image text in transcribed
You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information). A kiteboarding company is considering a new facility to manufacture an improved line of kites and another facility to produce a new line of boards. The company estimates that the new kite facility will cost $1,250,000 to construct in Year O with a salvage value of $150,000 in Year 12. The board manufacturing facility will cost $1,500,000 in Year O with a salvage value of $200,000 in Year 12. Combined annual revenue for the new kites and boards is expected to be $800,000 with annual combined operating costs of $300,000 each year. Management has identified a piece of land where both facilities could be built that could be purchased for $500,000 in Year 0. The management team estimates that the land may be sold for the same value of $500,000 at the end of Year 12. The company uses a discount rate of 10% and a tax rate of only 15%. Assume that the CCA rate of 20% can be applied to the land and the manufacturing facilities. What is the present value of the operating cash flows (i.e., revenues minus costs after tax)? $1,925,172.73 $2,347,252.50 $2,895,819.02

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

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

Personal Finance

Authors: E Thomas Garman, Raymond Forgue

11th Edition

1111531013, 9781111531010

More Books

Students also viewed these Finance questions

Question

Go, do not wait until I come

Answered: 1 week ago

Question

Make eye contact when talking and listening

Answered: 1 week ago