none {Accounting-Operating cash flow} A 5-year project is expected to generaterevenues of $100000, variable costsof $24000, and fixed costs of $16500. Theannual depreciation is $12000 and the taxrate is 35 percent. What is the annualoperating cash flow?

Explanation of Revenue: This represents the total amount of money generated from the project's…

Answered: {Accounting-Operating cash flow} A 5-…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Your division is considering two investment projects, each of which requires an up-front expenditure of 15 million. You estimate that the investments will produce the following net cash flows: a. What are the two projects net present values, assuming the cost of capital is 5%? 10%? 15%? b. What are the two projects IRRs at these same costs of capital?
Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income: The payback period of this project will be: a. 2.5 years. b. 2.6 years. c. 3.0 years. d. 3.3 years.
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
Average rate of return Determine the average rate of return for a project that is estimated to yield total income of 936,000 over eight years, has a cost of 1,200,000, and has a 100,000 residual value.
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
What is the internal rate of return for a project that cost $50,000 today this project is expected to provide the following net cash flows at the end of each year year one is equal to $10,000 year two is equal to $15,000 year three is equal to $20,000 and year four is equal to $25,000?
A five-year project is expected to generate annual revenues of $159,000, variable costs of $72,500, and fixed costs of $15,000. The annual depreciation is $19,500 and the tax rate is 21 percent. What is the annual operating cash flow? Can the calculator and excel solution be provided?
What is the operating cash flow? Give correct calculation
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{Accounting-Operating cash flow} A 5- year project is expected to generate revenues of $100000, variable costs of $24000, and fixed costs of $16500. The annual depreciation is $12000 and the tax rate is 35 percent. What is the annual operating cash flow?