(Calculating free cash flows) Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in inventory will decline due to increased efficiencies in getting inventory to showrooms. As a result of this new distribution center, Spartan expects a change in EBIT of $1,000,000. Although inventory is expected to drop from $86,000 to $62,000, accounts receivables are expected to climb as a result of increased credit sales from $83,000 to $130,000. In addition, accounts payable are expected to increase from $70,000 to $84,000. This project will also produce $400,000 of bonus depreciation in year 1 and Spartan Stores is in the 36 percent marginal tax rate. What is the project's free cash flow in year 1? The project's free cash flow year 1 is S. (Round to the nearest dollar.)
(Calculating free cash flows) Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in inventory will decline due to increased efficiencies in getting inventory to showrooms. As a result of this new distribution center, Spartan expects a change in EBIT of $1,000,000. Although inventory is expected to drop from $86,000 to $62,000, accounts receivables are expected to climb as a result of increased credit sales from $83,000 to $130,000. In addition, accounts payable are expected to increase from $70,000 to $84,000. This project will also produce $400,000 of bonus depreciation in year 1 and Spartan Stores is in the 36 percent marginal tax rate. What is the project's free cash flow in year 1? The project's free cash flow year 1 is S. (Round to the nearest dollar.)
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:(Calculating free cash flows) Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in inventory will decline due to increased
efficiencies in getting inventory to showrooms. As a result of this new distribution center, Spartan expects a change in EBIT of $1,000,000. Although inventory is expected to drop from $86,000 to $62,000,
accounts receivables are expected to climb as a result of increased credit sales from $83,000 to $130,000. In addition, accounts payable are expected to increase from $70,000 to $84,000. This project will also
produce $400,000 of bonus depreciation in year and Spartan Stores is in the 36 percent marginal tax rate. What is the project's free cash flow in year 1?
The project's free cash flow in year 1 is $. (Round to the nearest dollar.)
C
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