Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your firm is considering undertaking a project which requires an initial cash outlay of $500,000 and a $150,000 increase in working capital. The product will
Your firm is considering undertaking a project which requires an initial cash outlay of $500,000 and a $150,000 increase in working capital. The product will sell for $25 per unit. Anticipated demand is 10,000 units for the first year increasing to 15,000 units for the remaining 3 years of the project. Annual fixed costs are $10,000 and variable costs are 40% of sales. Interest expenses are $5,780 per year. Assume straight line depreciation, a $25,000 salvage value and a 35% tax rate. The $150,000 change in NWC is a cash (inflow/outflow) in year 0 and a cash (inflow/outflow) in year 4. Depretiation = EBIT in year 1= EBIT in years 2-4= NI in year 1= NI in years 2-4= CFO= include the negative sign CF1= CF2= CF3= CF4=
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