As a manager for Knickerbocker Toys you believe the Holly Hobbie line of dolls is poised for a comeback. Your proposed growth strategy is to offer a full-line of the dolls You can reacquire the rights to the brand for $2,000,000. You expect to make dolls for the next 4 years. New revenues associated with your growth strategy will be $2,500,000 for each year, while costs will be $1,800,000. The brand rights are to be straight line depreciated over the project,after which you plan on selling the brand rights for $600,000. The marginal corporate tax rate is 25%. Working capital will need to increase from $100,000 to $175,000 right away, fall to $150,000 in year 2 and be recovered to the original level in year 3. The net cash flow for year 0 is 2,175,000 , for year
As a manager for Knickerbocker Toys you believe the Holly Hobbie line of dolls is poised for a comeback. Your proposed growth strategy is to offer a full-line of the dolls You can reacquire the rights to the brand for $2,000,000. You expect to make dolls for the next 4 years. New revenues associated with your growth strategy will be $2,500,000 for each year, while costs will be $1,800,000. The brand rights are to be straight line depreciated over the project,after which you plan on selling the brand rights for $600,000. The marginal corporate tax rate is 25%. Working capital will need to increase from $100,000 to $175,000 right away, fall to $150,000 in year 2 and be recovered to the original level in year 3. The net cash flow for year 0 is 2,175,000 , for year
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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Transcribed Image Text:As a manager for Knickerbocker Toys you believe the Holly Hobbie line of dolls is poised for a comeback. Your
proposed growth strategy is to offer a full-line of the dolls You can reacquire the rights to the brand for
$2,000,000. You expect to make dolls for the next 4 years. New revenues associated with your growth strategy will
be $2,500,000 for each year, while costs will be $1,800,000. The brand rights are to be straight line depreciated
over the project,after which you plan on selling the brand rights for $600,000. The marginal corporate tax rate is
25%. Working capital will need to increase from $100,000 to $175,000 right away, fall to $150,000 in year 2 and
be recovered to the original level in year 3. The net cash flow for year 0 is 2,175,000
for year
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