A project will require $512,000 for fixed assets and $47,000 for networking capital. The fixed assets will be depreciated straight-line to azero-book value over the six-year life of the project. No bonusdepreciation will be taken. At the end of the project, the fixed assets willbe worthless. The net working capital returns to its original level at theend of the project. The project is expected to generate annual sales of$965,000 and costs of $508,000. The tax rate is 21 percent, and therequired rate of return is 14.7 percent. What is the amount of the annualoperating cash flow?O $283,633.33O $447,826.67$378,950.00$245,300.00$198,300.00

Reference:Vipond, T. (2024c, March 6). Operating cash flow. Corporate Finance Institute.…

Answered: A project will require $512,000 for…

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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A project will produce an operating cash flow of $164,000 a year for three years. The initial cash outlay for equipment will be $305,000. The net aftertax salvage value of $12,500 will be received at the end of the project. The project requires $41,000 of net working capital up front that will be fully recovered when the project ends. What is the net present value of the project if the required rate of return is 11 percent?$93,887.95 correct $90,124.63 incorrect$86,361.31 incorrect$82,597.99 incorrect$78,834,67 incorrect $93,887.95 $90,124.63 $86,361.31 $82,597.99 $78,834.67
Assume a project has estimated fixed costs of $61,200, variable costs per unit of $84.29, a selling price of $199, and an initial cost of $402,000 for fixed assets. Depreciation is straight-line to zero over the project’s 4-year life. The tax rate is 30 percent, and the discount rate is 12 percent. What is the financial breakeven point?
Pat Inc, is considering a project that would have a ten-year life and would require a $1,000,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $2,000,000 variable expenses $1,400,000 contribution margin $600,000 fixed expenses: fixed out-of-pocket cash expenses $300,000 depreciation $100,000 $400,000 net operating income $200,000 All of the above items, except for depreciation, represent cash flows. The company's required rate of return is…
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Gateway Communications is considering a project with an initial fixed assets cost of $1.47 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $248,000. The project will not change sales but will reduce operating costs by $415,000 per year. The tax rate is 21 percent and the required return is 12.3 percent. The project will require $56,000 in net working capital, which will be recouped when the project ends. What is the project's NPV? Multiple Choice O $256,094 $584,027 $193,231 $238,300 $247,833
A company is considering a new 6-year project that will have annual sales of $234,000 and costs of $146,000. The project will require fixed assets of $265,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2? a. 68460 b. 86912 c. 58752 d. 73097 e. 75379
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,250,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,200,000 in annual sales, with costs of $1,190,000. The project requires an initial investment in net working capital of $155,000, and the fixed asset will have a market value of $180,000 at the end of the project. Assume that the tax rate is 40 percent and the required return on the project is 10 percent. What are the net cash flows of the project for years 0 through 3? What is the NPV of the project?
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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,300,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,900,000 in annual sales, with costs of $1,910,000. The project requires an initial investment in net working capital of $186,000, and the fixed asset will have a market value of $221,000 at the end of the project. Assume that the tax rate is 21 percent and the required return on the project is 12 percent. a. What are the net cash flows of the project each year? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. b. What is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b.…
Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,400,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $3,030,000 in annual sales, with costs of $2,030,000. The project requires an initial investment in net working capital of $168,000, and the fixed asset will have a market value of $203,000 at the end of the project. Assume that the tax rate is 23 percent and the required return on the project is 10 percent. What are the net cash flows of the project each year? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. What is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Wendy and Wayne are evaluating a project that requires an initial investment of $792,000 in fixed assets. The project will last for fourteen years, and the assets have no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 143,000 units per year. Price per unit is $43, variable cost per unit is $24, and fixed costs are $800,712 per year. The tax rate is 36 percent, and the required annual return on this project is 12 percent. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 15 percent. Required: (a)Calculate the best-case NPV. (Do not round your intermediate calculations.) (Click to select) (b)Calculate the worst-case NPV. (Do not round your intermediate calculations.) (Click to select) W

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