CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were recently hired as assistant to the director of capital budgeting, and you must evaluate the new Ploje The lemon juice would be produced in an unused building adjacent to Allied's Fort Myers plant, Alhed owns the building, which is fully depreciated. The purchase price of the required equipment is $280,000, including shipping and installation costs, and the equipment is eligible for 100% bonus depreciation at the time of purchase. In addition, inventories would rise by $25,000, while accounts payable would increase by $5,000. All of these costs would be incurred at t = 0. te project is expected to operate for 4 vears, at which time it will be terminated. The cash inflows are assumed to begin 1 year after the project is undertaken, or at t = 1, and to continue out to t = 4. At the end of the project's life (t : %3D value of $25,000. 4), the equipment is expected to haye a salvage
CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were recently hired as assistant to the director of capital budgeting, and you must evaluate the new Ploje The lemon juice would be produced in an unused building adjacent to Allied's Fort Myers plant, Alhed owns the building, which is fully depreciated. The purchase price of the required equipment is $280,000, including shipping and installation costs, and the equipment is eligible for 100% bonus depreciation at the time of purchase. In addition, inventories would rise by $25,000, while accounts payable would increase by $5,000. All of these costs would be incurred at t = 0. te project is expected to operate for 4 vears, at which time it will be terminated. The cash inflows are assumed to begin 1 year after the project is undertaken, or at t = 1, and to continue out to t = 4. At the end of the project's life (t : %3D value of $25,000. 4), the equipment is expected to haye a salvage
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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Transcribed Image Text:CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is considering
expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were
recently hired as assistant to the director of capital budgeting, and you must evaluate the new Ploje
The lemon juice would be produced in an unused building adjacent to Allied's Fort Myers plant,
Alhed owns the building, which is fully depreciated. The purchase price of the required equipment
is $280,000, including shipping and installation costs, and the equipment is eligible for 100% bonus
depreciation at the time of purchase. In addition, inventories would rise by $25,000, while accounts
payable would increase by $5,000. All of these costs would be incurred at t = 0.
te project is expected to operate for 4 vears, at which time it will be terminated. The cash
inflows are assumed to begin 1 year after the project is undertaken, or at t = 1, and to continue
out to t = 4. At the end of the project's life (t :
%3D
value of $25,000.
4), the equipment is expected to haye a salvage
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