Your firm is deciding whether to invest in a project. Although long-term to estimate, management has predicted the following numbers for the first two years (in millions of dollars): Sales Cost of Goods Sold Selling, General, and Capital Cost Allowance Administrative Increases in Net Working Capital Capital Expenditures Corporate Tax Rate Year 1 140 50 6 24 5 30 30% Year 2 170 60 8 32 40 30% in from each flow for year 1 and year ? (Note: You only need to show the
Your firm is deciding whether to invest in a project. Although long-term to estimate, management has predicted the following numbers for the first two years (in millions of dollars): Sales Cost of Goods Sold Selling, General, and Capital Cost Allowance Administrative Increases in Net Working Capital Capital Expenditures Corporate Tax Rate Year 1 140 50 6 24 5 30 30% Year 2 170 60 8 32 40 30% in from each flow for year 1 and year ? (Note: You only need to show the
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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Am. 406.
Transcribed Image Text:Your firm is deciding whether to invest in a project. Although long-term cash flows are difficult
to estimate, management has predicted the following numbers for the first two years (in
millions of dollars):
Sales
Cost of Goods Sold
Selling, General, and Administrative
Capital Cost Allowance
Increases in Net Working Capital
Capital Expenditures
Corporate Tax Rate
Year 1
140
50
6
24
5
30
30%
Year 2
170
60
8
32
40
30%
Please calculate the free cash flow for year 1 and year 2. (Note: You only need to show the
calculations using a table. No explanation is needed.)
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