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(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 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 in 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 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 in year 1 is S (Round to the nearest dollar.)

Essentials Of Investments
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
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(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 in year 1 is $ (Round to the nearest dollar.) (...)
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 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 in year 1 is $ (Round to the nearest dollar.) (...)
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