You are considering expanding your product line that currently consists of skateboards to include gas powered skateboards and you feel you can sell 8000 of these per year for 10 years (After which time this project is expected to shut down the solar powered skateboards taking over.) The gas skateboards would sell for $80 each with variable cost of $50 for each one produced an annual fixed costs associated with production would be $190,000. In addition there would be $1,400,000 initial exponential associated with the purchase of new production equipment. It is assumed that this initial expenditure will be depreciated using the simplified straight-line method down to zero over 10 years. The project will also require a one time initial investment of $60,000 in net working capital associated with inventory, and this working captial investment will be recovered when the project is shut down. Finally assume that the firms marginal tax rate is 36%.
a. What is the initial cash outlay associated with this project?
b. What are the annual net cash flows associated with this project for years 1 through 9?
c. What is the terminal cash flow in year 10 ( that is, what is the free cash flow in year 10 plus any additinal cash dlows associated with termination of the project?)
d. What is the projects NPV given a required rate of return of 13 percent?
related to Checkpoint 12.1) Calculating project cash flows and NPV) You are considering expanding your product in the current core of aarde to Indudega powered word, word you feel you can 6.000 of these per year for 10 years (her which time this project is expected to shut down with a powered baking over)The skateboards would all for 300 cach with blow of foreach one produced, and a face associated with production would be $100,000 inwon, there would be a $1.400.000 in perdure sciated with the purchase of new production equipment is assured that perdure wil be depredadwing the impedire melted down to zero over 10 years. There will require a one-time til smart 360.000 in networking capital socied with inventory, and this working capital investibe recovered when the project is shut down. Finally, assume at the fra marginal tax rate is 36 percent - What is the cash outy sected with this project b. What are the annual reashows associated with the project for years through? e. What is the terminal cash Row in yow 10 hat is what is the free cash flow in year 10 plus any additional cash flows associated with termination of the projet d. What is the projects NPV given a required rate ofretum of 15 percent a. The initial cash outlay associated with this project is 400000 Round to the nearest dollar) The annual net cash flow associated with this project for years through Barot Pound to the nearest dolar) Related to Checkpoint 12.1) (Calculating project cash flows and NPV) You we considering expanding your product in the currently consists of skateboards to include gas-powered skateboards, and you feel you can sell 8.000 of these per year for 10 years (ather which time this project is expected to shut down with solar powered skateboards taking over). The gas skateboards would sell for $20 each with variable costs $50 for each one produced and are con sociated with production would be $100.000. In addition, there would be a $100.000 initial expenditure sociated with the purchase of new production equipment. It is sumed the initial expenditure wil be deprecated using the simplified straight line method down to moro over 10 years. The project will also require a one time initial investment of 300,000 in net working capital sociated with invertory, and the working capital investment will be recovered when project is shadow. Finally, aume that the firm's marginal tax rates 30 percent What is the nel cash outy associated with this project b. What are the latesh flow sted with this project for yours through What is the terminal cash fow in your 10 that is what is the free cash fow in year 10 plus any additional cash flow sted with formination of the project d. Wis the propos NPV gens required rate of humn of 13 percent? The indicashouty miled with this project is 10000 Round to the door The wou net cash flow wated with this project for years 1 trough Pound to the newest dolar) Question Related to Checkpoint 121) Celting project cash flow and NPV) You are considering expanding your product in the currently consists of and to include perd wars, and you will you can sel.000 per year for 10 years after which in the project is pected to shut down with lowered borde ingewers. The gas skateboards worth the whole of chore produced and feed med production would be 100.000. In addition, there would be a $1.400.000 expenditure cited was the purchase of production partida pendere will be deprecated in the fed wwe na method down to remover 10 years. There will also require a une merveer 100.000 in networking asociado and is wonen we be covered where What is the What are the cash flows me with that for years through What is the larminal cash fow in your 10 that is what are free cash fow in your tops y ditional chowe cited with writion of the project d. What is the projects NPV given a required rate of relum of 15 percent? The inlashday diled with the project is $460.000 und to the nearest dolor) The wal net cash flow moduled with this project for your 1 hroughout Round to the recruit dolar)
