Calculate the projects annual project free cash flow

Assignment Help Finance Basics
Reference no: EM13302735

The Clayton Manufacturing company is considering an investment in a new automated inventory system for its warehouse that will provide cash savings to the firm over the next five years. The firms CFO anticipates additional earnings before interest, taxes, depreciation, and amortization, from cost savings equal to 200,000 for the first year of operation of the center, and over the next four years the firm estimates this amount will grow at a rate of 5%per year. The System will require an initial investment of 800,000 that will depreciate over a five year period using straight line depreciation of 160,000 per year and a zero estimated salvage value.

A. Calculate the projects annual project free cash flow (PFCF) for each of the next five years where the firms tax rate is 35%.

B. If the cost of capital for the project is 12%, what is the projected NPV for the investment?

C.What is the minimum Year 1 dollar savings (i.e, EBITDA) required to produce a breakeven NPV = 0?

 

Reference no: EM13302735

Questions Cloud

Why cant you ever walk under the rainbow : Suppose you want to make a rainbow by spraying mist from a garden hose into the air. Why can't you ever walk under the rainbow
What is the minimum tractive effort required for vehicle : A 3000 lb vehicle has a drag coefficient of 0.32 and a frontal area of 30 ft2. What is the minimum tractive effort required for this vehicle to maintain a 65 mph speed on a 2% upgrade through an air density of 0.002045 slugs/ft3
What is the new break-even point : However, more labor will now be required, which will increase variable costs per unit to $34. The sales price will remain at $56.
What is the thermal efficiency of this heat engine : A heat engine using a diatomic ideal gas goes through the following closed cycle, What is the thermal efficiency of this heat engine
Calculate the projects annual project free cash flow : Calculate the projects annual project free cash flow (PFCF) for each of the next five years where the firms tax rate is 35%.
Develop an entity-relationship diagram as a conceptual mode : For the following requirements analysis description, develop an Entity-Relationship Diagram as a conceptual model that captures all of the requirements to the fullest extent possible.
Determine the maximum allowable tensile force : An aluminum link is subjected to axial tension. The loading is limited by the conditions of not yielding and not elongating excessively. The yield limit is satisfied if the stress remains below 50%of the 325M Payield stress.
Determine draft when the barge is empty of all corn and rain : A barge measures 10 ft (depth) by 35 ft by 120 ft and weighs 100 U.S. tons. The barge floats in fresh water (specific weight = 62.4 lb/ft3) and is evenly filled with 38,000 bushels of corn (60 lb/bushel).
How much less will the real world have to charge : If Judy increases the number of required exposures for Women > 55 by 10 will she need to rerun the model?

Reviews

Write a Review

Finance Basics Questions & Answers

  Why might management fees be a bigger factor

Why might management fees be a bigger factor in your investmentjdecision for bond funds than for stoc funds? Can your conclusion help explain why unmanaged unit investment trusts tend to focus on the fixed-income bracket?

  What is the present value of this amount

You are going to be given $100,000 in 12 years. Assuming an inflation rate of 3.5%, what is the present value of this amount?

  Sources of short-term-medium-term and long-term

What are some sources of short-term, medium-term, and long-term international financing? What are the costs associated with each of these sources?

  What is the companys breakeven point

A company's fixed operating costs are $690,000, its variable costs are $3.50 per unit, and the product's sales price is $4.05. What is the company's breakeven point; that is, at what unit sales volume will its income equal its costs? units

  What is the difference between short-term and long-term

What is the difference between short-term and long-term financing? How are the two approaches used to optimize the acquisition of funds?

  How do you record goodwill

Measure each of these items and prepare the journal entry that should be made to record the purchase on Energy's books.

  Foreign exchange risks

What are the sorts of foreign exchange risk companies encounter when they deal internationally? It would be great if you could describe in detail with examples if possible.

  Calculate the npv for both conveyor belt systems

Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 35 percent and the discount rate is 10 percent.

  What is the operating cycle at telecraft

Telecraft Enterprises carries 47 days of inventory in its stores. Last year Telecraft reported net sales of $1,408,900 and had receivables of $332,500 at the end of the year. What is the operating cycle at Telecraft.

  Increase the attractiveness of the stock in the free market

The board of directors of API, a relatively new electronics manufacturer, has decided to beginning paying a common stock dividend to increase the attractiveness of the stock in the free market

  Calculate the irr of each project

Calculate the IRR of each project and use it to determine the highest cost of capital at which all of the projects would be acceptable.

  What is the hospital underlying cost structure

General hospitals, a not-for-profit acute facility, has estimate the following cost fir its inpatient services: Fixed costs: $10,000,000 Variable cost per inpatient day.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd