Keene, Inc. is considering a new five-year expansion project that requires an initial fixed asset investment of $3.0 million. The fixed asset will be depreciated using on a straight-line basis to zero over its five year life. The fixed asset will have a market value of $350,000 at the end of the project. The project requires an initial investment in net working capital of $325,000. The working capital will be recovered at the end of the project’s life. The project is estimated to generate $2,250,000 in annual sales, with costs of $750,000. The tax rate is 35 percent. What is the free cash flow in year 1 (FCF1) on this project? a. $1,575,000 b. $975,000 c. $900,000 d. $1,500,000 e. $1,185,000
Keene, Inc. is considering a new five-year expansion project that requires an initial fixed asset investment of $3.0 million. The fixed asset will be
What is the
| a. |
$1,575,000 |
|
| b. |
$975,000 |
|
| c. |
$900,000 |
|
| d. |
$1,500,000 |
|
| e. |
$1,185,000 |
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