Question
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started