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Project cash flow (Cash Flow From Assets) for Year 1 is: $5,800,600 $4,756,384 O $7,800,231 $6,800,470 $9,120,000

Project cash flow (Cash Flow From Assets) for Year 1 is: $5,800,600 $4,756,384 O $7,800,231 $6,800,470 $9,120,000

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 cash flow (Cash Flow From Assets) for Year 1 is: $5,800,600 $4,756,384 $7,800,231 $6,800,470 O $9,120,000
Transcribed Image Text:Project cash flow (Cash Flow From Assets) for Year 1 is: $5,800,600 $4,756,384 $7,800,231 $6,800,470 O $9,120,000
Use the following information for the next four questions: The Anti-Zombie Corporation is considering expanding one of its production facilities to research a new type of virus, which will hopefully not cause a future zombie outbreak. The project would require a $24,000,000 capital investment and will be depreciated (straight-line to zero) over its 3 year life. They know that they will be able to salvage $6,000,000 for the equipment at that time. Incremental sales are expected to be $16,000,000 annually for the 3 year period with costs (excluding depreciation) of 40% of sales. The company would also have to commit initial working capital to the project of $2,000,000. The company has a 30% tax rate, and requires a 15% rate of return for projects of this risk level.
Transcribed Image Text:Use the following information for the next four questions: The Anti-Zombie Corporation is considering expanding one of its production facilities to research a new type of virus, which will hopefully not cause a future zombie outbreak. The project would require a $24,000,000 capital investment and will be depreciated (straight-line to zero) over its 3 year life. They know that they will be able to salvage $6,000,000 for the equipment at that time. Incremental sales are expected to be $16,000,000 annually for the 3 year period with costs (excluding depreciation) of 40% of sales. The company would also have to commit initial working capital to the project of $2,000,000. The company has a 30% tax rate, and requires a 15% rate of return for projects of this risk level.
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