Change in working capital-terminal cash flow

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A corporation is considering expanding operations to meet growing demand. With the capital expansion, the current accounts are expected to change. Management expects cash to increase by $20,000, accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable will increase by $50,000, accruals by $10,000, and long-term debt by $100,000. The change in net working capital is.......

A corporation is evaluating the relevant cash flows for a capital budgeting decision and must estimate the terminal cash flow. The proposed machine will be disposed of at the end of its usable life of five years at an estimate sale price of $15,000. The machine has an original purchase price of $80,000, installation cost of $20,000 , and will be depreciated under the five-year MACRS. Net working capital is expected to decline by $5,000. The firm has 40 percent tax rate on ordinary income and long-term capital gain. The terminal cash flow is .......

Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years . Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Which investment should the firm choose if the capital is 25 percent ?

Should XYZ Company accept a new project if its maximum payback is 3.5 years and its initial after tax cost is $5,000,000 and its is expected to provide after-tax operating cash flows of $1,800,000 in year 1, $1,900,000 in year 2, $700,000 in year 3 and $1,800,000 in year 4?

Reference no: EM1330943

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