Answered step by step
Verified Expert Solution
Question
1 Approved Answer
What is the terminal cash flow for the project? ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The
What is the terminal cash flow for the project?
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $771,900.00 work cell. Further, it will cost the firm $53,900.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $66,000.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $6,200.00. Finally, the firm will invest $10,800.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $909,000.00 with expenses estimated at 36.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 37.00%. The work cell is estimated to have a market value of $450,000.00 at the end of the fourth year. The firm expects to reclaim 89.00% of the final NWC position. The cost of capital is 14.00%
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