Calculate the after-tax operating cash flows, Econometrics

Your firm will produce widgets for the next 10 years (starting at t=1). Annual revenue from

selling widgets is $20,000. Production requires an initial outlay (at t=0) for machinery of $50,000, and

involves annual expenses for labor and raw materials of $3,000. In addition, the operation requires the firmto hold a certain amount of inventory. It is estimated that the level of inventory required is 10% of annualsales. You will need to build up this level of inventory before you start the project (i.e., at t=0). Themachinery will last 10 years and have zero salvage value. Any remaining assets of the firm will be

liquidated at the end of the ten years. Assume that the firm uses straight-line depreciation over the life ofthe equipment, pays 40% tax, and that all cash flows occur at the end of the year.

a) Calculate the after-tax operating cash flows for this firm

b) With an 8% WACC, what is the NPV of the project? Should you undertake it?

 

Posted Date: 3/16/2013 5:30:47 AM | Location : United States







Related Discussions:- Calculate the after-tax operating cash flows, Assignment Help, Ask Question on Calculate the after-tax operating cash flows, Get Answer, Expert's Help, Calculate the after-tax operating cash flows Discussions

Write discussion on Calculate the after-tax operating cash flows
Your posts are moderated
Related Questions

The following table gives data on the Consumer Price Index (CPI) and the Standard & Poor (S&P) company''s index of 500 common stock prices. Year CPI Index S&P 500 Index 1978 65.2 9


How can a person achieve his goal for development?Explain it with 5 examples.

energy consumption and economic growth

how do l get a co factor of a matrix

Show which of the following are cross-section data, giving the reasons. (i)    Wages of individual workers in the UK chemical industry in 2009. (ii)    Annual growth rates of eve

Problem 1: (a) Using examples explain the concept of cointegration. (b) Explain the term ‘stationarity' and its importance. (c) Differentiate between stochastic and determinist


Students in the red/black card game had to make individual deals. How would the situation change if they could bargain collectively?