What is the level of operating cash flows each year

Assignment Help Financial Management

Reference no: EM131896520

You are given the following information concerning a project for Havana:

• The corporation is considering to produce a new range of flip-flops – the flop-flip - that they have been assured by their marketing department will be extremely popular among 18 to 25 year olds.

• Havana expects that flop-flips will sell mostly in California and New York.

• The corporation will need to set up a new manufacturing plant to produce the flop-flips. The plant would cost of $30 million.

• The project involving the flop-flips will be for five years.

• They predict the most popular color will be white.

• Three years ago Havana completed a project investigating whether the market was ready for flop-flips. The project cost $2.5 million and concluded “No”.

• The project will involve zero investment in net working capital.

• There are zero taxes.

• The firm’s discount rate is 6%.

• For simplicity, ignore depreciation (i.e. assume it is 0) and any cash flows related to salvage value.

What is the level ($ amount) of operating cash flows each year if the project has a NPV of $10 million? (the operating cash flow is the same each year)

Reference no: EM131896520

Questions Cloud

What is the equivalent annual cost of each lightbulb : If you require a 10% return and use a light fixture 500 hours per year, what is the equivalent annual cost of each lightbulb?

Charge the government to break even : How much would the corporation have to charge the government to break even if rates must remain constant forever?

Compute the total marcs depreciation of the hotel : If the hotel is sold on June 10, 2020, compute the total MARCS depreciation of the hotel.

Make sharon indifferent between the new and old leases : What new lease payment would make Sharon indifferent between the new and old leases?

What is the level of operating cash flows each year : What is the level ($ amount) of operating cash flows each year if the project has a NPV of $10 million?

What is the after-tax cost of the preferred equity : What is the after-tax cost of the following preferred equity? The par value of the preferred share is $100 and the annual dividend is $7.00.

Holding small-company stocks are normally distributed : Assume the returns from holding small-company stocks are normally distributed.

Find the present value of the ordinary annuities : Find the present value of the following ordinary annuities. Find the present value of $500 due in future under each of following conditions.

Using the formula and financial calculator methods : calculate your final answer using the formula and financial calculator methods.

User Account

All Pages