Calculate the annual OCF for this project

Assignment Help Financial Management

Reference no: EM131176366

Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $127,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $582,000 per year. The fixed costs associated with this will be $186,000 per year, and variable costs will amount to 22 percent of sales. The equipment necessary for production of the Potato Pet will cost $634,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy’s is in a 30 percent tax bracket and has a required return of 12 percent.

Requirement 1: Calculate the Time 0 cash flow for this project. (Do not round intermediate calculations. Enter a negative sign when necessary. Round your answer to the nearest whole number (e.g., 32).)

Requirement 2: Calculate the annual OCF for this project. (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).)

Reference no: EM131176366

Questions Cloud

Capital budgeting timeline with their periods and cash flows : You have the following capital budgeting timeline with their periods and cash flows: 0 = ?, 1 = $4500, 2 = $4900, 3 = ?, 4 = ?, 5 = $4000, 6 = $3750. The terminal value of the project is $34,806.73. The NPV = $1311.33 and the cash flow in period 4 ca..

Prepare for their future child by saving appropriately : Saving for a Child’s Education. Harry and Sally want to prepare for their future child by saving appropriately for his/her college education. Suppose they anticipate needing the funds 20 years from today. Assume that the cost of a four-year college e..

Regarding ratio analysis as predictor of bankruptcy : Which one of these statements is correct regarding ratio analysis as a predictor of bankruptcy?

Calculate the break-even volume : A regional soft drink manufacturer is considering opening a new manufacturing plant in the Midwest.Its total fixed costs are $100 million, with the cost of the new plant included in that figure at a depreciatedvalue based on the expected life of the ..

Calculate the annual OCF for this project : Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $127,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $582,000 p..

What will the annual payments on the bank loan be : Temple Freight Forwarding Company needs $300 000 to finance the construction of several prefabricated metal warehouses. The firm that manufactures the warehouses has offered to finance the purchase with a $50 000 down-payment followed by five annual ..

The firm is evaluating new investment project : Organic Produce Corporation has 8.6 million shares of common stock outstanding, 610,000 shares of 7.1 percent preferred stock outstanding, and 186,000 of 8.3 percent semiannual bonds outstanding, par value $1,000 each. If the firm is evaluating a new..

What is the pre-tax cost of debt and after-tax cost of debt : XYZ corp. currently has 50 million shares of common stock outstanding. Their current market price is $80 per share and have a beta of 1.15. XYZ has $1 billion of bonds outstanding, each with the market value of $1100. It is known that the yield to ma..

User Account

All Pages