Compute the project''s annual net cash flows

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Question - The Taylor Mountain Uranium Company currently has annual cash revenues of $1.4 million and annual cash expenses of $700,000. Depreciation amounts to $100,000 per year. These figures are expected to remain constant for the foreseeable future (at least 15 years). The firm's marginal tax rate is 40 percent. A new high-speed processing unit costing $1.4 million is being considered as a potential investment designed to increase the firm's output capacity. This new piece of equipment will have an estimated usable life of 8 years and a $0 estimated salvage value. If the processing unit is bought, Taylor's annual revenues are expected to increase to $1.9 million and annual expenses (exclusive of depreciation) will increase to $800,000. Annual depreciation will increase to $260,000. Assume that no increase in net working capital will be required as a result of this project.

Compute the project's annual net cash flows for the next 8 years, assuming that the new processing unit is purchased. Enter your answer in thousands. For example, an answer of $1 thousand should be entered as 1, not 1,000. Round your answer to the nearest whole number.

Compute the net investment (NINV) for this project. Round your answer to the nearest dollar.

Reference no: EM132924920

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