onsider the case of Marston Manufacturing Company: Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,400,000, with an additional $170,000 in shipping and installation costs. Marston estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals). The total cost of Marston’s new equipment is$3,570,000 and consists of the price of the new equipment plus theproject’s accounts payable . In contrast, Marston’s initial investment outlay is$3,978,000 . Suppose Marston’s new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital investment. The com
onsider the case of Marston Manufacturing Company: Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,400,000, with an additional $170,000 in shipping and installation costs. Marston estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals). The total cost of Marston’s new equipment is$3,570,000 and consists of the price of the new equipment plus theproject’s accounts payable . In contrast, Marston’s initial investment outlay is$3,978,000 . Suppose Marston’s new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital investment. The com
Chapter1: Financial Statements And Business Decisions
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Consider the case of Marston Manufacturing Company:
Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,400,000, with an additional $170,000 in shipping and installation costs. Marston estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals).
The total cost of Marston’s new equipment is$3,570,000 and consists of the price of the new equipment plus theproject’s accounts payable .
In contrast, Marston’s initial investment outlay is$3,978,000 .
Suppose Marston’s new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital investment. The company chose to use straight-line depreciation , and the new equipment was fully depreciated by the end of its useful life. If the firm’s tax rate is 40%, what is the project’s total termination cash flow ?
$648,000
$400,000
$568,000
$240,000
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