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

Ask an Expert

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

Write your message here..

Related Questions

Models, when is an econometric model said to be simple and naive when is an econometric model said to be simple and naive

#title.regression., how to regress how to regress

Methodology, What methodology will be suitable to use for a doctoral resea... What methodology will be suitable to use for a doctoral research proposal thesis(The impact of persistent poverty on rural urban migration in Nigeria)?

Human Resources Management, Effective Human Resources Management Depends Up... Effective Human Resources Management Depends Upon Sound Reward System Essays and Term Papers

Long-run equilibrium solution, Suppose a small open economy is characterise... Suppose a small open economy is characterised by the following equations/information:             Y =6K 0 L 1-α             K 0 = 30,000             L 0 = 10,000

Expected values and variances, What is the expected value and variance of y... What is the expected value and variance of y = 3x+2 knowing that E(X) = 8 and var(X) = 4.

Auxiliary regression, Why use auxiliary regression? What are the benefits o... Why use auxiliary regression? What are the benefits of using it?

Hetroscedasticity, hypothetical data on consumption expenditure ($) and inc... hypothetical data on consumption expenditure ($) and income ($) is given in the table x Y 80 55 100 65 85 70 110 80 120 79 115 84

Revaluation of currency, what are the econometric models supporting currenc... what are the econometric models supporting currency revaluation and their application

Assignment question .., Process economics questions for assignment Process economics questions for assignment