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CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is consioenng 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 project. 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. The project is expected to operate for 4 vears, at which time it will be terminated. The cash inflows are assumed to begin 1 vear 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 = 4), the equipment is expected to have a salvage value of $25,000. %3D Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00 per operating costs for the proiect are eYnoctod to 25% and ito AA

CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is consioenng 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 project. 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. The project is expected to operate for 4 vears, at which time it will be terminated. The cash inflows are assumed to begin 1 vear 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 = 4), the equipment is expected to have a salvage value of $25,000. %3D Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00 per operating costs for the proiect are eYnoctod to 25% and ito AA

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
Problem 1PS
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Please answer part c and d

CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is consioenng 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 project. 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. The project is expected to operate for 4 vears, at which time it will be terminated. The cash inflows are assumed to begin 1 vear 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 = 4), the equipment is expected to have a salvage value of $25,000. %3D Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00 per operating costs for the proiect are eYnoctod to 25% and ito AA
Transcribed Image Text:CAPITAL BUDGETING AND CASH FLOW ESTIMATION Allied Food Products is consioenng 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 project. 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. The project is expected to operate for 4 vears, at which time it will be terminated. The cash inflows are assumed to begin 1 vear 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 = 4), the equipment is expected to have a salvage value of $25,000. %3D Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00 per operating costs for the proiect are eYnoctod to 25% and ito AA
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