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What is Tasty Foods Year 0 net investment outlay on this project? What is the expected non- operating cash flow when the project is terminated
What is Tasty Foods Year 0 net investment outlay on this project? What is the expected non- operating cash flow when the project is terminated at Year 4?
Marketing Cost $265,500 Used Equipment Price $700,000 Expected life 4 years Depreciation | MARCS (.33,.45,.15, and .07) (Yrs 1 to 4)| Shipping $35,000 Installation $70,000 Inventories (increase) $30,000 (at initial investment) Salvage Value (equipment)| $87,500 (after 4 yrs use) | Price $2.00 per carton Fixed Cost | $190,000 Variable Cash Operating cost $1.25 per unit Sales estimated fall due to Cannibalization on High Energy Original if High Energy Lite introduced 30% Lower Sales $80,000 (per year) Reduce production cost $35,000 (per year pre-tax) Net Pre-tax Cannibalization effect |-$80,000 + $35,000 = -$45,000 Tax Rate | 40% WACC | 12% Possible Lease of space | $43,750 for 20 yrs Possible Rent of Coca Cola Space for the Lite Product (almost no capital would have to be invested in the project if rented)|| VP Production concern: Space will be needed in 2 to 3 yrs assuming normal growth in sales of products Marketing Cost $265,500 Used Equipment Price $700,000 Expected life 4 years Depreciation | MARCS (.33,.45,.15, and .07) (Yrs 1 to 4)| Shipping $35,000 Installation $70,000 Inventories (increase) $30,000 (at initial investment) Salvage Value (equipment)| $87,500 (after 4 yrs use) | Price $2.00 per carton Fixed Cost | $190,000 Variable Cash Operating cost $1.25 per unit Sales estimated fall due to Cannibalization on High Energy Original if High Energy Lite introduced 30% Lower Sales $80,000 (per year) Reduce production cost $35,000 (per year pre-tax) Net Pre-tax Cannibalization effect |-$80,000 + $35,000 = -$45,000 Tax Rate | 40% WACC | 12% Possible Lease of space | $43,750 for 20 yrs Possible Rent of Coca Cola Space for the Lite Product (almost no capital would have to be invested in the project if rented)|| VP Production concern: Space will be needed in 2 to 3 yrs assuming normal growth in sales of productsStep by Step Solution
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