OCF = (sales-Variable cost-fixed cost-depr expense)*(1-tax rate)+depr expense
=(400000-240000-80000-50000)*(1-0.2)+50000
=74000
13) Tully's Tool and Die has the following projections for Year 1 of a capital budgeting...
El Dorado Storage has the following projections for Year 1 of a capital budgeting project. Sales $298,821 Variable costs $129,721 Fixed costs and selling, general and administrative expenses $10,732 Depreciation Expense $13,965 Tax Rate 35% Calculate the operating cash flow for Year 1. Round the answer to two decimals
El Dorado Storage has the following projections for Year 1 of a capital budgeting project. Sales $286,035 Variable costs $122,282 Fixed costs adn selling, general and administrative expenses $13,074 Depreciation Expense $22,699 Tax Rate 35% Calculate the operating cash flow for Year 1. Round the answer to two decimals.
El Dorado Storage has the following projections for Year 1 of a capital budgeting project. Sales $236,872 Variable costs $127,101 Fixed costs adn selling, general and administrative expenses $10,611 Depreciation Expense $11,711 Tax Rate 35% Calculate the operating cash flow for Year 1. Round the answer to two decimal
Prudencio Corporation has provided the following information concerning a capital budgeting project: After-tax discount rate 13 % Tax rate 30 % Expected life of the project 4 Investment required in equipment $ 160,000 Salvage value of equipment $ 0 Annual sales $ 400,000 Annual cash operating expenses $ 290,000 One-time renovation expense in year 3 $ 40,000 The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments....
Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projections: Year 0 1 2 3 Sales (Revenues) 100,000 100,000 100,000 - Cost of Goods Sold (50% of Sales) 50,000 50,000 50,000 - Depreciation 30,000 30,000 30,000 = EBIT 20,000 20,000 20,000 - Taxes (35%) 7000 7000 7000 =...
The profitability index (PI) is a capital budgeting tool that is defined as the present value of a project's cash inflows divided by the absolute value of its initial cash outflow. Consider this case: Happy Dog Soap Company is considering investing $2,500,000 in a project that is expected to generate the following net cash flows: Happy Dog Soap Company uses a WACC of 9% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this project's PI (rounded...
Sensys AB is considering a new capital budgeting project that will last for three years. Sensys plans on using a cost of capital of 3% to evaluate this project. Sensys has also capital expenditures of 90,000 which will be depreciated straight-line over 3 years. Based on extensive research, it has prepared the following incremental cash flow projections: Year 0 1 2 3 Sales (Revenues) 100,000 100,000 100,000 - Cost of Goods Sold (50% of Sales) 50,000 50,000 50,000 - Depreciation...
Bate Manufacturing is considering a project with a 7 year life. The data for the project are given below. What is the free cash flow in Year 0 for this project? Sales revenue, each year: $150,000 Variable costs, each year: $20,000 Fixed costs, each year: $10,000 Depreciation expense, each year: $50,000 Initial outlay (i.e. cost of equipment): $300,000 Increase in Net Operating Working Capital: $30,000 Tax rate: 30%
The following information concerning a proposed capital budgeting project has been provided by Jochum Corporation: Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables. Investment required in equipment $ 164,000 Salvage value of equipment $ 0 Working capital requirement $ 22,000 Annual sales $ 630,000 Annual cash operating expenses $ 487,000 One-time renovation expense in year 3 $ 50,000 The expected life of the project is 4 years. The income tax rate is 30%. The...
2. The basic process and rules for capital budgeting Aa Aa The capital budgeting process consists of the following activities: I. Estimating the relevant cash flows II. Reviewing a project's post-implementation and post-termination performance III. Evaluating alternatives and selecting the projects to be implemented IV. Generating capital investment project proposals What is the correct sequence for these activities? O IV, II, III, I O I, IV, II, III There are several practical aspects of capital budgeting that complicate what appears...