Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What is the operating cash flow for year 4 of project A that Blue Eagle Technology should use in its NPV analysis of the project?

What is the operating cash flow for year 4 of project A that Blue Eagle Technology should use in its NPV analysis of the project? The tax rate is 15 percent. During year 4, project A is expected to have relevant revenue of 85,000 dollars, relevant variable costs of 23,000 dollars, and relevant depreciation of 10,000 dollars. In addition, Blue Eagle Technology would have one source of fixed costs associated with the project A. Yesterday, Blue Eagle Technology signed a deal with Omar Advertising to develop a marketing campaign. The terms of the deal require Blue Eagle Technology to pay Omar Advertising either 30,000 dollars in 4 years if project A is pursued or 33,000 dollars in 4 years if project A is not pursued. Finally, the equipment purchased for the project would be sold in 4 years for an expected after-tax cash flow of 5,000 dollars.

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

Working Capital Management And Finance A HandBook For Bankers And Finance Managers

Authors: R.K.Gupta, Himanshu Gupta

4th Edition

1645875547, 9781645875543

More Books

Students also viewed these Finance questions

Question

1. Let a, b R, a Answered: 1 week ago

Answered: 1 week ago

Question

5. Recognize your ability to repair and let go of painful conflict

Answered: 1 week ago