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Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.862 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $222,600. The project requires an initial investment in net working capital of $318,000. The project is estimated to generate $2,544,000 in annual sales, with costs of $1,017,600. The tax rate is 31 percent and the required return on the project is 14 percent. Required: (a) What is the project's year 0 net cash flow? (b) What is the project's year 1 net cash flow? (c) What is the project's year 2 net cash flow? (d) What is the project's year 3 net cash flow? (e) What is the NPV?
Weiland Co. shows the following information on its 2014 income statement: sales = $162,500; costs = $80,000; other expenses = $3,300; depreciation expense = $9,000; interest expense = $6,500; taxes = $22,295; dividends = $8,150. In addition, you're t..
The Golf Range is considering adding an additional driving range to its facility. The range would cost $229,000, would be depreciated on a straight-line basis over its seven-year life, and would have a zero salvage value. What is the internal rate of..
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Clay Harden borrowed $25,000 from a bank at an interest rate of 9% compounded monthly. The loan will be repaid in 36 equal monthly installments over 3years. Immediately after his 20th payment, Clay desires to pay the remainder of the loan in a single..
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