Operating cash under this cost-cutting proposal

Assignment Help Financial Management

Reference no: EM131880310

Cost-cutting Proposal

Ruler Industry is considering a 4-year project with an initial cost for fixed assets of $618,000. The project will have to occupy a plant the company bought 10 years ago at the price of $100,000. Today, the estimated market value of the plant is $150,000. And the company projects the market value of the plant will stay the same over the next 4 years. The project will reduce operating costs by $265,000 a year. The equipment will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the equipment will be sold for an estimated $40,000. The tax rate is 34 percent. The project will require $23,000 in extra inventory over the project’s life. Assume the discount rate is 14 percent.

1. What is the after-tax salvage cash flow from the sales of the fixed assets at the end of the project?

2. What is the annual increase in operating cash under this cost-cutting proposal?

Reference no: EM131880310

Questions Cloud

Should you use humor in a presentation : Should you use humor in a presentation? How could inappropriate humor in a presentation damage your credibility? Should you eliminate all humor?

What is a more effective means of coercion : What is a more effective means of coercion against a threat of military action? Is there an example I can use?

What do you think about american imports from your country : What do you think this means for American imports from your country? What do you think it means for American exports to your country?

Performance for the past seven weeks : The following data represent her hotel's Thursday night performance for the past seven weeks.

Operating cash under this cost-cutting proposal : What is after-tax salvage cash flow from sales of fixed assets at the end of project?What is annual increase in operating cash under this cost-cutting proposal.

Write description of criminal behavior : Discuss the etiology theories discussed in Module 2 as they pertain to your selected criminal behavior. Describe relevant prevention, intervention.

Solve the puzzle by using uniform-cost graph search : CISC 339 Aritificial Intelligence Project - Solve the 8-puzzle problem. Solve the puzzle by using uniform-cost graph search

Work in a middle-management position : A company has just hired your foreign friend to work in a middle-management position. Since you have lived in the United States for many years

The price per share of your all-equity firm : The price per share of your all-equity firm is $30, and there are 2M shares outstanding. What is the new price per share after issuing this debt?

User Account

All Pages