Cost of new equipment: $200,000 Installation: $20,000 Change in Net Operating Working Capital: $50,000 New sales per year: $115,000 New operating costs per year: $50,000 Economic life: 4 years Depreciable life: MACRS 3-year class (33%, 45%, 15%, 7%) Salvage value: $20,000 Tax Rate: 25% WACC: 9% What is the total initial investment outlay (FCF0)? What is the operating cash flow for year 2, or FCF2? (SHOW ALL WORK/STEPS) What are the planned non-operating cash flows in year 4 (i.e. terminal cash flows)? (SHOW ALL WORK/STEPS) What is the book value of the equipment after three years?
Cost of new equipment: $200,000 Installation: $20,000 Change in Net Operating Working Capital: $50,000 New sales per year: $115,000 New operating costs per year: $50,000 Economic life: 4 years Depreciable life: MACRS 3-year class (33%, 45%, 15%, 7%) Salvage value: $20,000 Tax Rate: 25% WACC: 9% What is the total initial investment outlay (FCF0)? What is the operating cash flow for year 2, or FCF2? (SHOW ALL WORK/STEPS) What are the planned non-operating cash flows in year 4 (i.e. terminal cash flows)? (SHOW ALL WORK/STEPS) What is the book value of the equipment after three years?
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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- Cost of new equipment: $200,000
- Installation: $20,000
- Change in Net Operating Working Capital: $50,000
- New sales per year: $115,000
- New operating costs per year: $50,000
- Economic life: 4 years
Depreciable life: MACRS 3-year class (33%, 45%, 15%, 7%)- Salvage value: $20,000
- Tax Rate: 25%
- WACC: 9%
What is the total initial investment outlay (FCF0)?
What is the operating cash flow for year 2, or FCF2? (SHOW ALL WORK/STEPS)
What are the planned non-operating cash flows in year 4 (i.e. terminal cash flows)? (SHOW ALL WORK/STEPS)
What is the book value of the equipment after three years?
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