Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the information below to answer Questions 1 9 and 2 0 . Needle and Thread Inc. is considering expanding one of its production facilities

Use the information below to answer Questions 19 and 20.
Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $850,000 capital investment and $50,000 shipping fee, and will be equally depreciated (straight-line) over its 4 year life. They believe they can salvage $250,000 for the equipment at the end of the project.
Incremental sales are expected to be $1,000,000 annually for the 4 year period with cash expenses of 43% of sales. The company would also have to commit initial working capital to the project of $700,000. The company is subject to a marginal tax rate of 30% and investors require a 10% return on projects with a similar risk.
19. What is the initial cash outlay associated with this project (FCF in Year 0)?
A.-$1,850,000
B.-$1,600,000
C.-$900,000
D.-$750,000
E.- $430,000
image text in transcribed

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

Students also viewed these Finance questions