Construction lot of sector in order to grow its production

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Reference no: EM131588116

Slade Industries are trying to determine the construction a lot of a sector in order to grow its production. The construction of the new lot of expected to have a life of 3 years. It in terms of depreciation it would would be categorized within the 3 year MARC class. New equipment that would need to be purchased will cost 10 million. Fee of installation would be $500,000. Additional assets owned by Slade Industries is $1 mil. The venture would increase Slade Industries accounts receivables by $300,000 and its inventory by $400,000. Slade Industries predicts annual sales revenues will be $5 million each year, and annual expenses will be $2 million each year. In addition, the prediction is that the venture will increase sales on some of Slades existing projects by $700,000 each year. By the end of 3 years, Slade Industries predicts to sell the equipment for $1.5 million. Tax rate is 40%. Calculate all the relevant cash flows for this venture in order to make a capital budgeting decision.

Reference no: EM131588116

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