Sales revenue is amount generated by the firm through sale of goods or services. It is used to measure the size of the business. Sales revenue = [ Net income + Taxes + Operating expenses + Depreciation ] Net cashflow refers to the change in the firm’s cash balance as indicated in the cash flow statement. It is commonly used to evaluate the cash flow balances in the firm. The following is the general formula used to calculate the net cash flow. Net cashflow = Net income + Depreciation HTW’s net income was $240,000; depreciation was $100,000; and operating expenses were $500,000 before including depreciation. The tax rate is 40%.

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AGG is a US multinational that manufactures specialist high tech parts in the airline engine industry. AGG is an established company with steady growth in turnover and dividends over the last 10 years. The company is undertaking a projected titled Project Big as a strategic response to the changing market scene. AGG will develop a new state of the art highly automated plant located in Cambodia which is expected to result in cost advantages if it is implemented. The details about the project are below • Initital investment has been estimated at $500m • • The annual pre tax savings in operating costs at current exchange rates has been calculated at $150m for the first four years (starting in the first year) The residual value of the project at the end of the four years is estimated to be $250m The initial investment, net of residual value, qualifies for capital allowance and can be claimed back on a straight line basis over the four years of the project. Current AGG's cost of capital is…

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Chapter 2, Problem 6PROB

Summary Introduction

Sales revenue is amount generated by the firm through sale of goods or services. It is used to measure the size of the business.

Sales revenue=[Net income+Taxes+Operating expenses+Depreciation]

Net cashflow refers to the change in the firm’s cash balance as indicated in the cash flow statement. It is commonly used to evaluate the cash flow balances in the firm. The following is the general formula used to calculate the net cash flow.

Net cashflow=Net income+Depreciation

HTW’s net income was $240,000; depreciation was $100,000; and operating expenses were $500,000 before including depreciation. The tax rate is 40%.

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AGG is a US multinational that manufactures specialist high tech parts in the airline engine industry. AGG is an established company with steady growth in turnover and dividends over the last 10 years. The company is undertaking a projected titled Project Big as a strategic response to the changing market scene. AGG will develop a new state of the art highly automated plant located in Cambodia which is expected to result in cost advantages if it is implemented. The details about the project are below • Initital investment has been estimated at $500m • • The annual pre tax savings in operating costs at current exchange rates has been calculated at $150m for the first four years (starting in the first year) The residual value of the project at the end of the four years is estimated to be $250m The initial investment, net of residual value, qualifies for capital allowance and can be claimed back on a straight line basis over the four years of the project. Current AGG's cost of capital is…

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