Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are evaluating a new project for your company FINSOFT, Inc., which has developed a new financial software. The project requires an initial investment of

image text in transcribed
image text in transcribed
You are evaluating a new project for your company FINSOFT, Inc., which has developed a new financial software. The project requires an initial investment of $252,000 in fixed assets which are to be depreciated straight-line to zero over the 3-year project life. At the end of year 3 , all fixed assets are sold for an estimated resale value of $63,000. Net Working Capital requirements at the beginning of each year equal 10% of the projected sales during the following year. Projected sales from the new software are $300,000 in year 1,$360,000 in year 2 , and $420,000 in year 3 . The variable costs amount to 50% of projected sales and fixed costs are $36,000 per year. The tax rate is 20%. Hints: Change in NWC at t=0 equals 10% of the projected sales at t=1. It is an outflow. Change in Fixed Assets at t=3 equals the resale value minus the tax on the capital gain. It is an inflow. QUESTIONS: Question 1: Operating Cash Flow at t=1( Year 1) is Question 2: Operating Cash Flow at t=2 (Year 2) is Question 3: Operating Cash Flow at t=3( Year 3) is Question 1: Operating Cash Flow at t=1 (Year 1) is Question 2: Operating Cash Flow at t=2 (Year 2) is Question 3: Operating Cash Flow at t=3( Year 3) is Question 4: Change in NWC at t=0 is Question 5: Change in NWC at t=1 (Year 1 ) is Question 6: Change in NWC at t=3 (Year 1) is Question 7: Change in Fixed Assets at t=0 (initial investment) is Question 8: Change in Fixed Assets at t=3( Year 3) is

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

Modern Portfolio Theory and Investment Analysis

Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann

9th edition

9781118805800, 1118469941, 1118805801, 978-1118469941

More Books

Students also viewed these Finance questions