Question

*First, what is the annual operating cash flow of the project for year 1?

*What is the annual operating cash flow of the project for year 2?

*What is the annual operating cash flow of the project for year 3?

*What is the annual operating cash flow of the project for year 4?

*What is the annual operating cash flow of the project for year 5?

*Next, what is the after-tax cash flow of the equipment at disposal?

*Then, what is the incremental cash flow of the project in year 0?

*What is the incremental cash flow of the project in year 1?

*What is the incremental cash flow of the project in year 2?

*What is the incremental cash flow of the project in year 3?

*What is the incremental cash flow of the project in year 4?

*What is the incremental cash flow of the project in year 5?

*So what is the IRR of the project?

• mathad.com/StudentPlayerHomework.aspx/homeworkd-541158034&questionid=1&flushed=false&cd=56683588.centerwin-yes F1 302-321/322 Fall 2019 Barnez Chatelain & 11/3/19 8:04 PM Save Homework: Chapter 10 Homework Score: 0 of 1 pt P10-20 (similar to) B of 8 (8 complete HW Score: 75%, 6 of 8 pts Question Help Proiect cash flow and NPV. The managers of Class Autos incorpored plan to manuscrease Thunderbird (1057 replicas) The necessary foundry and will cost a lot of $4,100.000 and will be deprecated using a five-year MACRS The sales manager has an estimate for the sale of the classe Thunderbirds. The sales volume will be as follows Year one: 240 Year two 300 Year three: 340 Your four 370 Year five 310 If the sales price is $28.000 per variable costs are $18.000 perc, and fixed costs are $1.400.000 annually what is the annual operating cash flow the tax rate is 30%? The equipment is sold for salvage for $500,000 at the end of year live. Not working capital increases by 5500,000 at the beginning of the project(year) and is reduced back to its original level in the final year. Find the infomal rate of return for the project using the incremental cash flows

Answer 1

Answer:

Annual operating cash flow of the project for year 1 Annual operating cash flow of the project for year 2 Annual operating cash flow of the project for year 3 Annual operating cash flow of the project for year 4 Annual operating cash flow of the project for year 5 After-tax cash flow of the equipment at disposal Incremental cash flow of the project in year 0 incremental cash flow of the project in year 1 Incremental cash flow of the project in year 2 Incremental cash flow of the project in year 3 Incremental cash flow of the project in year 4 Incremental cash flow of the project in year 5 IRR $946,000 $1,513,600 $1,636,160 $1,751,696 $1,331,696 $420,848 -$4,600,000 $946,000 $1,513,600 $1,636,160 $1,751,696 $2,252,544 19.45%

Working:

Year Cost of Equipment Increase in NWC 0 ($4,100,000) ($500,000) Sales Units Sales price per unit Variable cost per unit 240 $28,000 $18,000 300 $28,000 $18,000 340 $28,000 $18,000 370 $28,000 $18,000 310 $28,000 $18,000 Sales Value Variable cost Fixed cost Depreciation rate Depreciation EBT Tax rate 30% EAT Add back depreciation Annual operating cash flow $6,720,000 ($4,320,000)| ($1,400,000) 20.00% ($820,000) $180,000 ($54,000) $126,000 $820,000 $946,000 $8,400,000 $9,520,000 ($5,400,000)| ($6,120,000)| ($1,400,000)| ($1,400,000) 32.00% 19.20% ($1,312,000) ($787,200) $288,000 $1,212,800 ($86,400)| ($363,840) $201,600 $848,960 $1,312,000 $787,200 $1,513,600 $1,636,160 $10,360,000 ($6,660,000) ($1,400,000) 11.52% ($472,320) $1,827,680 | ($548,304)| $1,279,376 $472,320 $1,751,696 $8,680,000 ($5,580,000) ($1,400,000) 11.52% ($472,320) $1,227,680 ($368,304) $859,376 $472,320 $1,331,696 $3,280,000 $1,968,000 $1,180,800 $708,480 Salvage value Book value of equipment Gain on sale Tax on gain After-tax cash flow of the equipment at disposal Recovery of net working capital $500,000 $236,160 $263,840 ($79,152) $420,848 $500,000 Incremental Cash flows ($4,600,000)| $946,000 $1,513,600 $1,636,160 $1,751,696 | $2,252,544 IRR 19.45%