Answer the question based on the following info: Do not round the intermediate calculations and round the final answer to the nearest whole number. Thomson Media is considering a new project that will cost the firm $70,000 for the equipment, which has a useful life of three years. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at time zero. The equipment would be sold for $5,000 at the end of Year 3 when the project would be closed down. Also, additional net operating working capital (NOWC) in the amount of $10,000 would be required to implement the project, but it would be recovered at the end of the project's life. Revenues and operating costs in the amount of $61,000 and $30,000, respectively, are expected to be generated annually from the project over its three-year useful life. The cost of capital for the project is 10% and the tax rate is 25%. What is the initial cash flow of the project? -$52,500 -$62,500 -$70,000 -$80,000
Answer the question based on the following info: Do not round the intermediate calculations and round the final answer to the nearest whole number.
Thomson Media is considering a new project that will cost the firm $70,000 for the equipment, which has a useful life of three years. Under the new tax law, the equipment is eligible for 100% bonus
$5,000 at the end of Year 3 when the project would be closed down. Also, additional net operating working capital (NOWC) in the amount of $10,000 would be required to implement the project, but it would be recovered at the end of the project's life. Revenues and operating costs in the amount of $61,000 and $30,000, respectively, are expected to be generated annually from the project over its three-year useful life. The cost of capital for the project is 10% and the tax rate is 25%.
What is the initial cash flow of the project?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
