Question
XYZ Corp. is considering a new project. The project will require $329652 for new fixed assets, $156504 for additional inventory and $29991 for additional accounts
XYZ Corp. is considering a new project. The project will require $329652 for new fixed assets, $156504 for additional inventory and $29991 for additional accounts receivable. Short-term debt is expected to increase by $102025 and long-term debt is expected to increase by $295163. The project has a 5-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 25% of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $555124 and costs of $389823. The tax rate is 35% and the required rate of return is 15%.
What is the initial cost of this project?(Round answer to 0 decimal places, do not round intermediate calculations)
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