First, what is the annual operating cash flow of the project for year 1? (Round to the nearest dollar.) What is the annual operating cash flow of the project for year 2? (Round to the nearest dollar.) What is the annual operating cash flow of the project for year 3? (Round to the nearest dollar.)
First, what is the annual operating cash flow of the project for year 1? (Round to the nearest dollar.) What is the annual operating cash flow of the project for year 2? (Round to the nearest dollar.) What is the annual operating cash flow of the project for year 3? (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
Related questions
Question
Project cash flow and NPV . The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of
depreciated using a five-year MACRS life,
.
The sales manager has an estimate for the sale of the classic Thunderbirds. The annual sales volume will be as follows:
$4,200,000
and will be |
Year one: 260
|
|
Year four: 380
|
|
|
Year two: 300
|
|
Year five: 310
|
|
|
Year three: 340
|
|
|
If the sales price is
internal rate of return for the project using the incremental cash flows.
$27,000
per car, variable costs are
$16,000
per car, and fixed costs are
$1,400,000
annually, what is the annual operating cash flow if the tax rate is
30%?
The equipment is sold for salvage for
$500,000
at the end of year five. Net working capital increases by
$500,000
at the beginning of the project (year 0) and is reduced back to its original level in the final year. Find the MACRS Fixed Annual Expense Percentages by Recovery Class
|
Year
|
3-Year
|
5-Year
|
7-Year
|
10-Year
|
|
|
1
|
33.33%
|
20.00%
|
14.29%
|
10.00%
|
|
|
2
|
44.45%
|
32.00%
|
24.49%
|
18.00%
|
|
|
3
|
14.81%
|
19.20%
|
17.49%
|
14.40%
|
|
|
4
|
7.41%
|
11.52%
|
12.49%
|
11.52%
|
|
|
5
|
|
11.52%
|
8.93%
|
9.22%
|
|
|
6
|
|
5.76%
|
8.93%
|
7.37%
|
|
|
7
|
|
|
8.93%
|
6.55%
|
|
|
8
|
|
|
4.45%
|
6.55%
|
|
|
9
|
|
|
|
6.55%
|
|
|
10
|
|
|
|
6.55%
|
|
|
11
|
|
|
|
3.28%
|
First, what is the annual operating cash flow of the project for year 1?
(Round to the nearest dollar.)
What is the annual operating cash flow of the project for year 2?
(Round to the nearest dollar.)
What is the annual operating cash flow of the project for year 3?
(Round to the nearest dollar.)
What is the annual operating cash flow of the project for year 4?
(Round to the nearest dollar.)
What is the annual operating cash flow of the project for year 5?
(Round to the nearest dollar.)
Next, what is the after-tax cash flow of the equipment at disposal?
(Round to the nearest dollar.)
Then, what is the incremental cash flow of the project in year 0?
(Round to the nearest dollar.)
Then, what is the incremental cash flow of the project in year 0?
(Round to the nearest dollar.)
What is the incremental cash flow of the project in year 1?
(Round to the nearest dollar.)
What is the incremental cash flow of the project in year 2?
(Round to the nearest dollar.)
What is the incremental cash flow of the project in year 3?
(Round to the nearest dollar.)
What is the incremental cash flow of the project in year 4?
(Round to the nearest dollar.)
What is the incremental cash flow of the project in year 5?
(Round to the nearest dollar.)
So, what is the IRR of the project?
(Round to two decimal places.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education