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1) 6,680,000 2) 8,160,000 3) 7,280,000 4) 6,280,000 5) 8,240,000

1) 6,680,000 2) 8,160,000 3) 7,280,000 4) 6,280,000 5) 8,240,000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Given the data in the following table, the project's total operating net cash flow i year 10 is $ • NOTE: The table below applies to questions 32 to 36 (it is included on eac these questions). ASC, Inc. is considering the production of a new line of soft drinks at its Springfield, IL plant. The CFO of ASC, Inc. is provided with the following information on the new project. ➤ The expansion will require the immediate purchase of new machinery for $29,000,000. The firm has spent $1,000,000 to train workers to use the new machinery. The incremental sales from this project are expected to be $19,500,000 per year. The incremental operating expenses (excluding depreciation) are expected to equal $11,300,000 per year. > The company uses straight-line depreciation. The project has an economic life of 10 years. The machinery has a salvage value of $1,000,000 and will be sold for that amount at the conclusion of the project. The company will increase net working capital by $1,200,000 at the beginning of the project, and it will be liquidated at the end of the project. ASC Inc.'s marginal tax rate is 40%. > ASC Inc.'s weighted average cost of capital (WACC) is 10%. 1) 6,680,000 2) 8,160,000 3) 7,280,000 4) 6,280,000 5) 8,240,000
Transcribed Image Text:Given the data in the following table, the project's total operating net cash flow i year 10 is $ • NOTE: The table below applies to questions 32 to 36 (it is included on eac these questions). ASC, Inc. is considering the production of a new line of soft drinks at its Springfield, IL plant. The CFO of ASC, Inc. is provided with the following information on the new project. ➤ The expansion will require the immediate purchase of new machinery for $29,000,000. The firm has spent $1,000,000 to train workers to use the new machinery. The incremental sales from this project are expected to be $19,500,000 per year. The incremental operating expenses (excluding depreciation) are expected to equal $11,300,000 per year. > The company uses straight-line depreciation. The project has an economic life of 10 years. The machinery has a salvage value of $1,000,000 and will be sold for that amount at the conclusion of the project. The company will increase net working capital by $1,200,000 at the beginning of the project, and it will be liquidated at the end of the project. ASC Inc.'s marginal tax rate is 40%. > ASC Inc.'s weighted average cost of capital (WACC) is 10%. 1) 6,680,000 2) 8,160,000 3) 7,280,000 4) 6,280,000 5) 8,240,000
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