(Calculating free cash flows?) You are considering new elliptical trainers and you feel you can sell 4,000 of these per year for 5 years? (after which time this project is expected to shut down when it is learned that being fit is? unhealthy). The elliptical trainers would sell for ?$1,000 each and have a variable cost of ?$500 each. The annual fixed costs associated with production would be ?$1,200,000. In? addition, there would be a ?$6,000,000 initial expenditure associated with the purchase of new production equipment. It is assumed that this initial expenditure will be depreciated using the simplified? straight-line method down to zero over 5 years. This project will also require a? one-time initial investment of ?$1,200,000 in net working capital associated with? inventory, and that working capital investment will be recovered when the project is shut down.? Finally, assume that the? firm's marginal tax rate is 32 percent.
a. What is the initial outlay associated with this? project?
b. What are the annual free cash flows associated with this project for years 1 through? 4?
c. What is the terminal cash flow in year 5 ?(that is, what is the free cash flow in year 5 plus any additional cash flows associated with the termination of the? project)?
d. What is the ?project's NPV given a required rate of return of 11 ?percent?
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(Calculating free cash flows?) You are considering new elliptical trainers and you feel you can sell...
Calculating free cash flows You are considering new elliptical trainers and you feel you can sell 6,000 of these per year for 5 years (after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1,500 each and have a variable cost of $750 each. The annual fixed costs associated with production would be $1,100,000. In addition, there would be a $7,000,000 initial expenditure associated with...
(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 6,000 of these per year for 5 years (after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1,000 each and have a variable cost of $500 each. The annual fixed costs associated with production would be $1,000,000. In addition, there would be a $7,000,000 initial expenditure associated with...
(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 3,000 of these per year for 5 years (after which time this project is expected to shut down when it is leamed that being fit is unhealthy). The elliptical trainers would sell for $1,000 each and have a vanable cost of $500 each. The annual fixed costs associated with production would be $1,300,000. In addition, there would be a $7,000,000 initial expenditure associated with...
(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 4,000 of these per year for 5 years after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1,800 each and have a variable cost of $900 each. The annual fixed costs associated with production would be $1,100,000. In addition, there would be a $5,000,000 initial expenditure associated with...
(Calculating project cash flows and NPV) You are considering new elliptical trainers and you feel you can sell 5 comma 000 of these per year for 5 years (after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1 comma 000 each with variable costs of $500 for each one produced, and annual fixed costs associated with production would be $1 comma 000 comma 000....
(Calculating free cash flows) You are considering new elliptical trainers and you feel you can sell 3,000 of these per year for 5 years (after which time this project is expected to shut down when it is learned that being fit is unhealthy). The elliptical trainers would sell for $1,500 each and have a variable cost of $750 each. The annual fixed costs associated with production would be $1,000,000. In addition, there would be a $7,00,000 initial expenditure associated with...
(Calculating free cash flows) At present, Solartech Skateboards is considering expanding its product line to include gas-powered skateboards; however, it is questionable how well they will be received by skateboarders. Although you feel there is a 70 percent chance you will sell 9,000 of these per year for 10 years (after which time this project is expected to shut down because solar-powered skateboards will become more popular), you also recognize that there is a 15 percent chance that you will...
(Calculating free cash flows) At present, Solartech Skateboards is considering expanding its product line to includegas-powered skateboards; however, it is questionable how well they will be received by skateboarders. Although you feel there is a 60 percent chance you will sell 10,000 of these per year for 10 years(after which time this project is expected to shut down becausesolar-powered skateboards will become more popular), you also recognize that there is a 20 percent chance that you will only sell 4,000...
(Calculating free cash flows) At present, Solartech Skateboards is considering expanding its product line to include gas-powered skateboards; however, it is questionable how well they will be received by skateboarders. Although you feel there is a 60 percent chance you will sell 12,000 of these per year for 10 years (after which time this project is expected to shut down because solar-powered skateboards will become more popular), you also recognize that there is a 2020 percent chance that you will...
(Calculating free cash flows) At present, Solartech Skateboards is considering expanding its product line to include gas-powered skateboards; however, it is questionable how well they will be received by skateboarders. Although you feel there is a 50 percent chance you will sell 11 comma 000 of these per year for 10 years (after which time this project is expected to shut down because solar-powered skateboards will become more popular), you also recognize that there is a 25 percent chance that...