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Project Beta is a project which will last for 7 years and which requires an initial outlay of $3,000.  This outlay will be depreciated using straight-line depreciation over the life of the project.  It will generate incremental revenue of $1200 per year.  The value of incremental, after-tax earnings is $400 per year.  The project will require Net Working Capital equal to 10% of incremental revenue. What is the value of incremental free cash flow in Year 0? Question 5Answer a. $-3120 b. $2880 c. $-2880 d. $3120

Project Beta is a project which will last for 7 years and which requires an initial outlay of $3,000.  This outlay will be depreciated using straight-line depreciation over the life of the project.  It will generate incremental revenue of $1200 per year.  The value of incremental, after-tax earnings is $400 per year.  The project will require Net Working Capital equal to 10% of incremental revenue. What is the value of incremental free cash flow in Year 0? Question 5Answer a. $-3120 b. $2880 c. $-2880 d. $3120

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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Project Beta is a project which will last for 7 years and which requires an initial outlay of $3,000.  This outlay will be depreciated using straight-line depreciation over the life of the project.  It will generate incremental revenue of $1200 per year.  The value of incremental, after-tax earnings is $400 per year.  The project will require Net Working Capital equal to 10% of incremental revenue.

What is the value of incremental free cash flow in Year 0?

Question 5Answer

a.
$-3120
b.
$2880
c.
$-2880
d.
$3120
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