What are the operating cash flows in year 1

Assignment Help Finance Basics
Reference no: EM133074205

Mike Mulligan Excavation Inc. is considering the purchase of a new Caterpillar 345DL Hydraulic Excavator. The machine will be used for two years to excavate building foundations. The cost of the machine is $300,000 and it can be sold for $100,000 at the end of two years. Mike estimates that, with the new machine, he can dig 35 foundations per year with an average invoice price of $10,000. Mike estimates that his incremental costs will be $150,000 per year (for wages, fuel, and maintenance). The company's cost of capital is 9% and the marginal tax rate is 35%. What are the operating cash flows in Year 1? Assume that the cost of buying the new excavator is tax deductible at the end of the first year.

Reference no: EM133074205

Questions Cloud

What is the cost of equity after recapitalization : Cede & Co. expects its EBIT to be $55,000 every year forever. The firm can borrow at 7 percent. The firm currently has no debt, its cost of equity is 11 percent
What is the complete diagnostic plan : What is the complete diagnostic plan and rational and the pertinent positives and negatives supporting diagnoses
Calculate the net sales revenue for the transaction : 8 Mar 2019 Sold 40 units with 10% trade discount and credit term 2/7 Net 14. Calculate the Net Sales Revenue for the transaction on 8 March 2019
What is the covariance between the returns : Greta, an elderly investor, has a degree of risk aversion of A =4when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the
What are the operating cash flows in year 1 : What are the operating cash flows in Year 1? Assume that the cost of buying the new excavator is tax deductible at the end of the first year.
Strategic development : How does your educational organization develop strategic objectives and action plans? How are these strategic objectives and action plans implemented
What are the terminal year cash flows : The Rumpel Company purchased a felt press last year at a cost of $7,500. The machine has worn out quickly and is slowing production. It could be sold today for
Personnel decision making : Personnel decision making if you see fit, but don't go too far afield addressing how you would select and retain a housewife and homemaker
Describe ethical dilemma for disclosing legal liabilities : Describe the ethical dilemma for disclosing legal liabilities, and the options for accountants. Does this change culture to culture

Reviews

Write a Review

Finance Basics Questions & Answers

  Hire a general contractor

A man inherited his grandmother's summerhouse. The house was horrible shape. The man decided to hire a general contractor.

  What was her return on investment

Later, she sold the building for $220,000. What was her return on investment

  Calculate the time-weighted geometric average return

Calculate the time-weighted geometric average return on this portfolio and calculate the time-weighted arithmetic average return on this portfolio and calculate the dollar-weighted average return on this portfolio

  What are the advantages and disadvantages of mutual funds

What are the advantages and disadvantages of mutual funds? What are the similarities and differences between mutual funds and exchange-traded-funds (ETFs)

  Explain the four shipping markets

Explain the four shipping markets and discuss the relationships that exist between them

  Finding the debt-equity ratio

A $200 million equity only company wants to restructure itself with a mix of equity and debt. It can borrow up to $100 million at a pre-tax cost of 15%.

  Overall moral of their employees

Should companies be considering ways to reduce the gap to improve the overall moral of their employees?

  Explain the capital asset pricing model

Explain the Capital Asset Pricing Model in terms of a CFO managing his/her investor relations. Prepare a Risk Analysis for Chevron Corp

  How much more money is required to fund

How much more money is required to fund an ordinary perpetuity than a 35-year ordinary annuity, if the funds can earn 6% compounded quarterly

  Explain the purpose of the calculation

Explain the calculations in each of the three panels below, one at a time. Explain the purpose of the calculation and the procedure of the calculation, i.e., how the data inputs determine the output - the result. Bond Questions Support Sheets.xlsx (p..

  Discuss the advantages of using work sampling

Discuss the advantages of using work sampling to understand how employees allocate their time among work activities.

  Positive and negative actions about personal information

What are some positive and negative actions about personal information being accessed by companies on the internet.

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!

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