What is the incremental free cash flow for year one

Assignment Help Financial Management

Reference no: EM131020135

Your company is considering the replacement of an old delivery van with a new one that is more efficient. The old van cost $40,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight line method over a useful life of 8 years. The old van could be sold today for $7,000. The new van has an invoice price of $80,000 and it will cost $6000 to modify the van to carry the company's products. Cost savings from the use of the new van are expected to be $28,000 per year for 5 years, at which time the van will be sold for its estimated salvage value of $18,000. The new van will be depreciated using the simplified straight line method over its 5 year useful life. The company's tax rate is 35%. Working capital is expected to increase by $5000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the incremental free cash flow for year one? (Please show me how to work this problem out, not just give the answer)

Reference no: EM131020135

Questions Cloud

Bonds on the market with maturity : Hollin Corporation has bonds on the market with 18.5 years to maturity, a YTM of 6.5 percent, and a current price of $1,048. The bonds make semiannual payments. What must the coupon rate be on these bonds? Step by step please.

In a principal–agent view of bureaucratic behavior : In a principal–agent view of bureaucratic behavior, a bureaucratic agency’s principals are A. The firms from whom it makes purchases. B. The President. C. The citizen taxpayers. D. Its staff members.

Expected return-standard deviation of investors portfolio : Two companies Amber and Bolt are manufacturers of glass. The securities of the companies are listed and traded in the New York Stock Exchange. An investor’s portfolio consists of these two securities in the proportion of 5/6 and 1/6 respectively. Cal..

End of each year into an equity fund : Assume you invest $5,300 at the end of each year into an equity fund. The fund is expected to pay 11.4% percent interest annually. How much money will you have in the fund in 20 years?

What is the incremental free cash flow for year one : Your company is considering the replacement of an old delivery van with a new one that is more efficient. The old van cost $40,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight line method over a us..

Explain the concept of risk and bheta : Explain the concept of risk and bheta. Include bheta’s different cases. Give your OWN examples. 2. Discuss bheta’s determinants. Give your OWN examples.

Mention the sarbanes and oxley act : Elaborate on the concepts of governance, accountability, transparency in companies. Ascertain that you include the interaction of owners, management and Board of Directors. Furthermore, mention the Sarbanes /Oxley act.

What do you expect the price of the bond to be in two years : You own a bond with the following features: 8 years to maturity, face value of $1000, coupon rate of 2% (annual coupons) and yield to maturity of 2.3%. If you expect the yield to maturity to remain at 2.3%, what do you expect the price of the bond to..

What is the after-tax salvage value of the old machine : Waterford Industries is considering the purchase of a new machine. It will replace an existing but obsolete machine that will be sold for $50,000. What is the after-tax salvage value of the old machine?

User Account

All Pages