Calculate the initial outlay of the project

Assignment Help Financial Management

Reference no: EM131906503

Macro Incorporated is the manufacturer of mini-excavators and is considering producing a new line of equipment in an effort to increase its market share. The new production line will cost $2, 550,000 for manufacturing the parts and an additional $630,000 is needed for installation. The equipment falls into the MACRS 3-yr class, and would be sold after four years for $600,000.

The equipment line will generate additional annual revenues of $950,000 in year 1, and $1,250,000 in the following years until the sale of the equipment. The project will attract additional annual operating expenses of $600,000. An inventory investment of $253,000 is required during the life of the project. Macro is in the 20 percent tax bracket, and its existing cost of capital is 6 percent.

A. Calculate the initial outlay of the project.

B. Calculate the annual after-tax operating cash flow for Years 1 - 4. (PLEASE PAY SPECIAL ATTENTION TO YEAR 4)

Reference no: EM131906503

Questions Cloud

Credit card application : You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of 3.6 percent per year,

How many ppm of oil were in the soil : An 11.0 kg sample of soil was extracted and produced 2.732 g of oil. How many ppm of oil were in the soil?

Explain how the given actions would affect the money supply : Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment.

Why people disagree with the development of freud theories : Sigmund Freud, although one of the best-known personality theorists, is probably also one of the most controversial in the field of psychology.

Calculate the initial outlay of the project : Calculate the initial outlay of the project. Calculate the annual after-tax operating cash flow for Years 1 - 4.

Precipitate form in the mixed solution : A solution containing potassium bromide is mixed with one containing lead acetate to form a solution that is 0.013 M in KBr and 0.0035 M in Pb(C2H3O2).

Provide a historical and literature review : Provide a historical and literature review at a high level on one of several potential themes - Quantum Computing, Robots in Space and Bush re prevention

What is effective annual rate on loan : What is the effective annual rate on this loan? What will your monthly payments be?

How many grams of the starting material : If 3.54 g of Ba3(PO4)2 are produced by the reaction BaCl2(aq) + Na3PO4(aq) --> NaCl(aq) + Ba3(PO4)2(s), how many grams of the starting material, BaCl2.

User Account

All Pages