A company is considering a 3-year project with an initial cost of $876,000. The project will not directly produce any sales but will reduce operating costs by $195,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $410,000. The tax rate is 25 percent and the required return is 10 percent. An extra $42,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3? $638,821.80 $629,821.80 $620,821.80 $611,821.80 $602,821.80
A company is considering a 3-year project with an initial cost of $876,000. The project will not directly produce any sales but will reduce operating costs by $195,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $410,000. The tax rate is 25 percent and the required return is 10 percent. An extra $42,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3? $638,821.80 $629,821.80 $620,821.80 $611,821.80 $602,821.80
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 17P
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A company is considering a 3-year project with an initial cost of $876,000. The project will not directly produce any sales but will reduce operating costs by $195,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $410,000. The tax rate is 25 percent and the required return is 10 percent. An extra $42,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3? $638,821.80 $629,821.80 $620,821.80 $611,821.80 $602,821.80
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