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 $3,900,000 and will be depreciated using a five-year MACRS life, LOADING... . The sales manager has an estimate for the sale of the classic Thunderbirds. The annual sales volume will be as follows: Year one: 230 Year four: 370 Year two: 280 Year five: 330 Year three: 350 If the sales price is $28,000 per car, variable costs are $17,000 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 internal rate of return for the project using the incremental cash flows. First, what is the annual operating cash flow of the project for year 1? 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.)
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 $3,900,000 and will be depreciated using a five-year MACRS life, LOADING... . The sales manager has an estimate for the sale of the classic Thunderbirds. The annual sales volume will be as follows: Year one: 230 Year four: 370 Year two: 280 Year five: 330 Year three: 350 If the sales price is $28,000 per car, variable costs are $17,000 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 internal rate of return for the project using the incremental cash flows. First, what is the annual operating cash flow of the project for year 1? 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
$3,900,000
and will be LOADING...
.|
Year one: 230
|
|
Year four: 370
|
|
|
Year two: 280
|
|
Year five: 330
|
|
|
Year three: 350
|
|
|
If the sales price is
working capital increases by
internal rate of return for the project using the incremental cash flows .
$28,000
per car, variable costs are
$17,000
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 $500,000
at the beginning of the project (year 0) and is reduced back to its original level in the final year. Find the First, what is the annual operating cash flow of the project for year 1?
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?
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