Reference no: EM131346511
Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be fully depreciated (straight-line) over its 3 year life. They believe they can salvage $300,000 for the equipment at that time.
Incremental sales are expected to be $10,000,000 annually for the 3 year period with costs (excluding depreciation) of 42%. The company would also have to commit initial working capital to the project of $1,000,000. The company has a 36% tax rate.
The project cash flow for Year 0 is -$10,000,000; Year 1 is $4,792,000; Year 2 is $4,792,000; and Year 3 is $5,984,000 now SHOW YOUR WORK...HOW DID WE ARRIVE AT THIS FIGURES FOR EACH YEAR? SHOW IN WORKSHEET OR EXCEL; HOWEVER, SHOW YOUR WORK TO GET CREDIT FOR YOUR ANSWER:
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: Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be fully depreciated (straight-line) over its 3 year life. They be..
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