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(solution) 1.) ABC Company has a proposed project that will generate sales


1.) ABC Company has a proposed project that will generate sales of 464 units annually at a selling price of $176 each. The fixed costs are $5,753 and the variable costs per unit are $94. The project requires $29,415 of equipment that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. That is, depreciation each year is $29,415/4. That tax rate is 29 percent. What is the operating cash flow?


2.) ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $20,895 and shipping and installation costs are another $723. The project will also require an initial $4,374 investment in net working capital. The company's tax rate is 40%. What is the project's initial investment outlay?


3.) A project has an initial requirement of $210,739 for new equipment and $9,766 for net working capital. The installation costs to get the new equipment in working condition are 2,237. The fixed assets will be departed to a zero book value over the 4-year life of the project and have an estimated salvage value of $141,243. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $107,970 and the cost of the capital is 18%. What is the projects NPV if the tax rate is 35%?


4.) ABC has a proposed project which will generate sales of 135 units at a selling price of $265 each. The fixed costs are $14,209 and the variable costs per unit are $67. The project requires $194,948 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. That is, depreciation each year is $194,948/5. The tax rate is 28%. What is the operating cash flow?




Sales

 

Less Expense

 

Variable Expense

 

Fixed Cost

 

Depreciation

 

PBT

 

TAX

 

PAT

 

ADD depreciation

 

operating cash flow 81664

 

43616

 

5753

 

7354

 

24941

 

7233

 

17708

 

7354

 

25062 Purchase Cost

 

shipping and...

 


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Sep 13, 2020

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