User Account

All Pages

Total after-tax cash flow for the project

Assignment Help Finance Basics
Reference no: EM132397634

There is a sports shoes manufacturer. Having spent $120,000 on market research, the firm finds a new line of sports shoes promising and considers making new investments on it. For further evaluation, the following are investment and operational data for the new sports shoes product line.

New Equipment costs $14,000,000 and has 5 years economically useful life with zero salvage value. Also, the depreciation is calculated on the straight-line basis.

Incremental investment in Net Working Capital (NWC) at the beginning of the project is $1,000,000. 

New Sports Shoes Product: 45,000 pairs of new sports shoes will be sold every year in the next 5 years, each pair of new sports shoes will be sold for $700. The variable cost is $320 per pair and fixed cost (excluding depreciation) per year is $7,500,000.

The launch of new sports shoes product would lower the sales volume of existing sports shoes product by 13,000 pairs per year in the next 5 years, and sales price and variable cost for each pair of existing sports shoes product are $500 and $280 respectively.

If there is 40% corporate tax rate, what is the amount of initial outlay, operating cash flow per year and terminal cash flow of the new sports shoes project.

Also, the total after-tax cash flow for the project from year 0 to year 5.

And if the required rate of return is 15%, should the firm invest in the new project if the net present value rule is used?

Reference no: EM132397634

Questions Cloud

Implications of emh to my investment decision or strategy : Also, if there are some examples to illustrate the arguments and justify the conclusion, it would be great.
Calculate the cash flows if the asset : Calculate the cash flows if the asset is sold now at $60,000.
Discuss what the continued growth of internet banking : Discuss what the continued growth of internet banking should do to both economies of scale and scope of banking.
Calculate the profit on combined position : A trader shorts one share of a stock index for $50 and buys a European call option with strike price $60 on that stock index that expires in 2 years for $10.
Total after-tax cash flow for the project : Also, the total after-tax cash flow for the project from year 0 to year 5.
Missing information on a bond : Your broker faxed to you the following information about two annual bonds that you are considering as a potential investment.?
Average age of receivables remains at 50 days : Westley Company currently has an average age of accounts receivable is 50 days, the average age of accounts payable is 41 days, and the average age
Find the present value of these cash flows : How much money have you accumulated for your retirement? Your account pays you 6.11 percent per year, compounded annually.
What is the rent that the owner should charge : What is the rent that the Owner should charge per square foot? If Tenant Z rents 1200 sf of usable area, what will be his monthly rent?

Reviews

Write a Review

Finance Basics Questions & Answers

  Gs stock with a strike price

The current risk-free rate is 0.3% per month. What is the price of a 3-month put on GS stock with a strike price of $30 (put-call parity)

  How many quarters of coverage has jordan attained

For part of the summer of this year, Jordan worked full time at a local accounting firm. Jordan is a 19-year-old accounting student attending a state university

  Prepare a business report on microsoft and ford

Prepare a business report on microsoft and ford

  What is the present value of the final

What is the present value of the final $101.75 cash flow (that is 28 years from now). Choice Properties REIT equity is a candidate for a "bond surrogate" because it pays a stable dividend supported by collecting rent on grocery stores.

  Tax loss at the disposal of capital assets

Why is there typically a tax gain or tax loss at the disposal of capital assets?

  Build simulation model to estimate expected npv of j-crew

Build a simulation model to estimate the expected NPV of J-Crew and run your simulation with 5,000 trials

  To what sort of option on the counter partys assets can the

to what sort of option on the counter partys assets can the current exposure of a credit-risky position better be

  What is the correct name for each of these losses

What is the correct name for each of these losses? What is the difference between them? Please give examples of each.

  Calculate the weighted cost of capital for southern company

Calculate the weighted cost of capital for The Southern Company. Estimate the fair market value (NPV) of SKS today. Assume that after 2020, EBIT will remain constant at $6030 million (no growth).

  Create the same tax impact without the confusion

As it relates to Adjusted Gross Income and "Above the Line" or "Below the Line" when changes were made to the tax laws that created the phase out of certain itemized deductions, could there have been another way to create the same tax impact witho..

  Name some marketing techniques and styles

Name some marketing techniques and styles that you have encountered that demonstrate many of the strongpoints we learned in this course.

  Compute the total manufacturing cost per unit

Direct materials expense is $3.00 per unit; direct labor is $4.50 per unit. Variable overhead costs is $1.50 per unit; fixed overhead costs is $2.00 per unit. Secretarial salaries are $7.00 per unit and advertising amounts to $4.00 per unit.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd