Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are considering creating a new product line in warehouse space that originally cost you $52,895 5 years ago. The required machinery would cost $6,786,

You are considering creating a new product line in warehouse space that originally cost you $52,895 5 years ago.

  • The required machinery would cost $6,786, should last 9 years, after which could be scrapped for $887.
  • Net working capital would need to immediately increase by $4,332, but could return to normal levels after 9 years.
  • Annual sales and operating costs are expected to be $7,097 and $1,688, respectively.
  • 18% of customers are expected to switch over from your existing product lines.
  • Your firm's cost of capital (WACC) is 8.3% and effective corporate tax rate is 43%.
  • Your firm uses straight line depreciation as its depreciation method.

What is this project's incremental cash flow in its final year 9? Enter your answer in decimal format to two decimal places (e.g., $1,538.72 would be entered as 1538.72).

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

Dividend Policy On Share Price Volatility In Indian Stock Market

Authors: Vijay Deswal

1st Edition

3841859623, 978-3841859624

More Books

Students also viewed these Finance questions