Solution-Calculate the operating cash flows

Calculate the operating cash flows

Assignment Help Finance Basics

Reference no: EM133121105

Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30%. The machine's base price is $650,000. For simplicity, we assume that no additional working capital is required during the machine's economic life. The firm's production department anticipates the machine will generate an additional $450,000 per year in annual operating revenue, while the associated annual operating expenses are projected to be $325,000 per year. Management estimates that at the end of 5 years, the machine can be sold for $120,000. Assume the asset class remains open after the machine is sold, and the firm's cost of capital is 12%. The firm's tax rate is 45%.

Calculate the operating cash flows each year from year 1 to year 5.
Calculate the total free cash flows at each date associated with this investment.
Calculate the NPV of this investment.
If the asset class is closed after the machine is sold at the end of 5 years, how will your answer in part 2) change? Why?

Reference no: EM133121105

Questions Cloud

What is the price of bond zw : Consider two bonds: bond XY and bond ZW. Bond XY has a face value of $1,000 and 10 years to maturity and has just been issued at par. It bears the current marke

Recommend specific example of process improvement : Recommend a specific example of a process improvement. Explain what tools or techniques would be used in the improvement process.

Present value of all future earnings : You are running a hot biotech company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increase

Compute DC Dessert direct material and direct labor variance : Total standard price per pound of ingredients $1.40. Compute DC Dessert's direct material and direct labor variances for the month of November

Calculate the operating cash flows : Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30

Competitive advantage strategies to exploit innovation : Determine competitive advantage strategies to exploit innovation at a given company.

Deduction of interest expense in the calculation : Suppose you are the TA for Finance. A student in the class is very puzzled by how operating cash flows are calculated. He does not understand why he needs to ad

How did Colonisation impact Indigenous Australians : Why is it important to understand Indigenous Australian culture when working with these consumers? What are the risk and protective factors for Aboriginal

Different diagnostic codes within medical records : Why is it important to understand the different diagnostic codes within medical records?

User Account

All Pages

Calculate the operating cash flows

Reference no: EM133121105

Reference no: EM133121105

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT