Solution-What is the cost of the project

What is the cost of the project

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Reference no: EM132491560

Your small company is considering producing a new line of orange flavored soft drink. This project is expected to generate additional revenues of $220,000 and additional costs of $100,000 per year for 5 years (years 1 - 5). Undertaking the project will require an increase in the company's net working capital (inventory) of $30,000 today (year 0). At the end of the project (year 5), inventory will return to the original level. Fixed assets needed for the project would cost $350,000. Assets will depreciate straight line to $50,000 (the market value of the assets at the end of the project, which will be sold). The marginal tax rate is 10%. The weighted average cost of capital (interest rate) for the firm is 8%.

What is the cost of the project (at time zero on the timeline)?
What is the operating cash flow for years 1 - 4?
In year 5, the firm would receive the OCF you calculated in question 6. What other adjustments are needed to the year 5 cash flow?
What is the present value of this project?
If you work in excel can you also show me the formulas that are used to find the answers.

Reference no: EM132491560

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What is the cost of the project

Reference no: EM132491560

Reference no: EM132491560

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