When compiling the relevant cash flows for a project, the after-tax value of any asset sold any time during the life of the project should be treated as a
- cash flow in the year of sale
-change in net working capital
-cash flow in the last year of the project
- reduction in the cash flow for Time 0
- cash outflow at Time 0
Solution :-
The Correct answer is (A)
the relevant cash flows for a project, the after-tax value of any asset sold any time during the life of the project should be treated as a cash flow in the year of sale
As we need to calculate present value of the cash flows so we need the year of sale in which cash comes
If there is any doubt please ask in comments
When compiling the relevant cash flows for a project, the after-tax value of any asset sold...
Consider an asset that costs $635,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $125,000. If the relevant tax rate is 35.00%, what is the aftertax cash flow from the sales of this asset?
Consider an asset that costs $635,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $125,000. If the relevant tax rate is 35.00%, what is the aftertax cash flow from the sales of this asset?
What is the after-tax cash flow from a sale of the following asset? Asset cost: $311,000 Depreciation: straight line to zero Asset useful life: 6 years Asset to be used in a four-year project Asset to be sold at the end of the project for $58,000 Tax rate: 34% $73,526.67 $68,411.19 $70,103.33 $40,466.67
1. When determining relevant cash flows for project evaluation, we should _____. a. discount interest expenses to the present b. subtract interest expenses from EBIT c. ignore interest expenses d. add back in interest expenses after subracting taxes 2. When calculating incremental cash flows, we should exclude _____. a. side effects b. taxes c. opportunity costs d. sunk costs 3. When calculating incremental cash flows, we should include _____. a. interest b. sunk costs c. financing expenses d. opportunity costs...
Question 7 (CHAPTER 10) Your company's boss asked you to estimate the cash flows relevant to a new investment project. In particular, he wants you to focus on Net Working Capital and how it may need to be adjusted for each year of the proposed project. Your answer: Here's the summary of your estimates: If accepted, the 3-year project would require an immediate investment of $30,000 into the Net Working Capital (NWC). It would be necessary to increase the Net...
Relevant cash flow and timeline depiction For each of the following projects, determine the relevant cash flows, and depict the cash flows on a time line. a. A project that requires an initial investment of $121,000 and will generate annual operating cash inflows of $26,000 for the next 20 years. In each of the 20 years, maintenance of the project will require a $4,700 cash outflow. b. A new machine with an installed cost of $84,000. Sale of the old...
Question 4 6 pts For each cash flow item, identify the required adjustment to get after-tax cash flows: Investment cash outflow Choose Expense cash outflow Choose Working capital cash inflow Choose Revenue cash inflow Choose Question 4 6 pts For each cash flow item, identify the required adjustment to get after-tax cash flows: Investment cash outflow Choose Expense cash outflow Choose Working capital cash inflow Choose Revenue cash inflow Choose
Relevant cash flow and timeline depiction For each of the following projects, determine the relevant cash flows, and depict the cash flows on a time line. a. A project that requires an initial investment of $120,000 and will generate annual operating cash inflows of $29,000 for the next 20 years. In each of the 20 years, maintenance of the project will require a $5,000 cash outflow. b. A new machine with an installed cost of $82,000. Sale of the old...
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.886 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $457,800. The project requires an initial investment in net working capital of $654,000. The project is estimated to generate $5,232,000 in annual sales, with costs of $2,092,800. The tax rate is 24 percent and the required return...
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.778 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $449,400. The project requires an initial investment in net working capital of $642,000. The project is estimated to generate $5,136,000 in annual sales, with costs of $2,054,400. The tax rate is 24 percent and the required return...