What are the project cash flows in each year

Assignment Help Financial Accounting
Reference no: EM133012270

Revenues generated by a new fad product are forecast as follows:

Year 1 revenues $56,000

Year 2 revenues $40,000

Year 3 revenues $30,000

Year 4 revenues $20,000

0 There after

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.

Required:

Problem a. What is the initial investment in the product? Remember working capital.

Problem b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm's tax rate is 40%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years.

Problem c. If the opportunity cost of capital is 12%, what is the project's NPV?

Problem d. What is project IRR?

Reference no: EM133012270

Questions Cloud

What were purchases on account for the year : The beginning balance was $622,000, and payments on account during the year were $1,635,000, what were purchases on account for the year?
What were collections during the year : What were collections during the year? If beginning balance in accounts receivable was $400,000, the ending balancewas $455,000
What would be the accounting entry for tiara ltd : Find what would be the accounting entry at the end of the reporting period to recognise three days' salary, wages expense PAYG payment to tax office
Determine the basic earnings per share amount : Determine the basic earnings per share amount for 2014. For the year ending 30 June 2014, Sirra Ltd reports the following: Net profit after tax of $600 000.
What are the project cash flows in each year : The firm's tax rate is 40%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years.
Discuss the business value of your proposed solution : Describe how do you propose to address the identified problems and Discuss the business value of your proposed solution. What will your customer and users gain
Provide necessary journal entries that will be posted years : After applying the requirements of AASB 2 and assuming that everything turns out exactly as expected, calculate the amounts that the entity will recognise
Calculate the amounts that the entity will recognise : Calculate the amounts that the entity will recognise during the vesting period for services received as consideration for the share options.
What is the problem on the scenario given : What is the problem on the scenario given

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is morrit tie ratio

What is Morrit's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.

  Preparing a cash budget-cash disbursements

A Company is preparing a cash budget for June. The company has $107,200 cash at the beginning of June and anticipates $131,770 in cash receipts and $149,560 in cash disbursements during June. This company has an agreement with its bank to maintain a ..

  Determine the carrying value of the bonds converted

On July 1, 2020, management called and retired half the bonds, Determine the Carrying value of the bonds converted

  What is the beta for barges corporation

Assume that the risk-free rate is 5%, and the market risk premium is 6%. If no unsystematic influence affected Barges' return, the beta for Barges is

  What is the dollar amount of the dividend

During the second year, Your Company paid cash dividends of $30,000. What is the dollar amount of the dividend that the common stockholders will receive?

  Make the dec entry to record the payment of the salaries

Make the Dec. 1, 2020 entry to record the payment of the salaries for item 5. On Oct 1, 2020, Virgin rivers Illustrators paid PIO,800 for 6-months' insurance

  Find what is the unit cost per visit to start

What is the unit cost per visit to start? In an effort to reduce costs, a clinic changes the staff mix but keeps the number of staff unchanged.

  Discuss three aspects of accounting for financial instrunent

Discuss the three aspects of accounting for financial instrument under NZIFRS 9 and why NZIFRS 9 was developed? Explain in detail.

  How much will appear as the carrying amount of the note

In the note amortization schedule before impairment, how much will appear as the carrying amount of the note as of December 31, 2019

  Calculate the amounts of net income and retained earnings

Effects of adjustments A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. Calculate the amounts of net income and retained earnings after the preceding adjustments are recorded.

  How much is loss on realization of noncash assets for anna

How much is the loss on realization of noncash assets? Bobby received $260,000 as a result of liquidating the partnership when 60% of the noncash.

  Establish the taxable income under the formula approach

In January of 2013, SLU of Tampa created a simple trust. This simple trust received interest income in an amount of $4,500 on October 6th of 2016. According to the IRS, this interest income qualified as tax exempt. SLU of Tampa invested $100,000 in l..

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