Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000....

Question

Question

Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000....

Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000. Racin' Scooters has a 33 percent marginal tax rate. The project will produce $90,000 of depreciation per year. In addition, the project will cause the following changes in year 1:

What is theproject's free cash flow in year 1?

   WITHOUT THE PROJECT   WITH THE PROJECT
Accounts receivable   44,000   62,000
Inventory   65,000   89,000
Accounts payable   75,000   93,000

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Answer :project free cashflow in year 1 is $350,750

Explanation

	Without the project	with the project
Accounts receivable	$44000	62000
Inventory	$65000	89000
Accounts payable	75000	93000
Working capital =current assets -current liabilities	34000	58000

Net change in working capital =34000-58000=-24000

Project Free Cashflow =EBIT(1-T)+depreciation +change in net working capital -capital expenditure

=$425000(1-0.33)+90000-24000

=$28,4750+90000-24000

=$350,750(answer)

Add a comment

Answer 2

Similar Homework Help Questions

Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000....

Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000. Racin' Scooters has a 33 percent marginal tax rate. The project will produce $90,000 of depreciation per year. In addition, the project will cause the following changes in year 1: What is theproject's free cash flow in year 1? WITHOUT THE PROJECT WITH THE PROJECT Accounts receivable 44,000 62,000 Inventory 65,000 89,000 Accounts payable 75,000 93,000
Racin' scooters is introducing a new product and has an expected change in net operation income...

Racin' scooters is introducing a new product and has an expected change in net operation income of $470,000. Racin' scooters has a 33 percent marginal tax rate. This project will also produce $97,000 of depreciation per year. In addition, this project will cause the following changes in year 1 without the project with the project Account receivable $44,000 $68,000 Inventory 69,000 $75,000 Account 73,000 93,000 What is the project's free cash flow in year 1? The free cash flow of...
Racin' Scooters is introducing a new product and has an expected change in EBIT of $...

Racin' Scooters is introducing a new product and has an expected change in EBIT of $ 455000. Racin' Scooters has a 31 percent marginal tax rate. The project will produce $100000 of depreciation per year. In addition, the project will cause the following changes in year 1: What is the project's free cash flow in year 1? WITHOUT THE PROJECT WITH THE PROJECT Accounts receivable 43,000 70,000 Inventory 61,000 86,000 Accounts payable 74,000 97,000

(Calculating free cash flows) Racin' Scooters is introducing a new product and has an expected change...

(Calculating free cash flows) Racin' Scooters is introducing a new product and has an expected change in EBIT of $465,000. Racin' Scooters has a 31 percent marginal tax rate. The project will produce $110,000 of depreciation per year. In addition, the project will cause the following changes in year 1: 6. What is the project's free cash flow in year 1? The project's free cash flow in year 1 is $. (Round to the nearest dollar.) i Data Table Х...
Duncan Motors is introducing a new product and has an expected change in net operating income...

Duncan Motors is introducing a new product and has an expected change in net operating income of $310,000. Duncan Motors has a 32 percent marginal tax rate. This project will also produce $51,000of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project With the Project Accounts receivable $31,000 $28,000 Inventory 20,000 35,000 Accounts payable 47,000 84,000 What is the project's free cash flow in year 1?
Tetious Dimensions is introducing a new product that is expected to increase it net operating income by $475,000. The co...

Tetious Dimensions is introducing a new product that is expected to increase it net operating income by $475,000. The company has a 30% marginal tax rate. This project will also produce $200,000 of depreciation per year. In addition, this project will cause the following changes: Without the Project With the Project Accounts Receivable $105,000 $130,000 Inventory $200,000 $280,000 Accounts Payable $90,000 $130,000 What is the projects free cash flow for year 1?

(Calculating changes in net operating working capital) Tetious Dimensions is introducing a new product and has...

(Calculating changes in net operating working capital) Tetious Dimensions is introducing a new product and has an expected change in net operating income of $790 comma 000790,000. Tetious Dimensions has a 3636 percent marginal tax rate. This project will also produce $180 comma 000180,000 of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project With the Project Accounts receivable $51 comma 00051,000 $93 comma 00093,000 Inventory 103 comma 000103,000 181 comma...
1. Visible Fences is introducing a new product and has an expected change in net operating...

1. Visible Fences is introducing a new product and has an expected change in net operating income of $900,000. Visible Fences has a 34 percent marginal tax rate. This project will also produce $300,000 of depreciation per year. In addition, this project will cause the following changes: Without the Project With the Project Accounts receivable $55,000 $63,000 Inventory 65,000 80,000 Account payable 70,000 94,000 What is the project's free cash flow for Year 1 2. Assume that a new project...
(Related to Checkpoint 12.1) (Calculating changes in net operating working capital) Tetious Dimensions is introducing a...

(Related to Checkpoint 12.1) (Calculating changes in net operating working capital) Tetious Dimensions is introducing a new product and has an expected change in net operating income of $765,000. Tetious Dimensions has a 36 percent marginal tax rate. This project will also produce $210,000 of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project With the Project Accounts receivable Inventory Accounts payable $56,000 103,000 69,000 $95,000 184,000 124,000 What is the...

(Related to Checkpoint 12.1) (Calculating changes in net operating working capital) Tetious Dimensions is introducing a...

(Related to Checkpoint 12.1) (Calculating changes in net operating working capital) Tetious Dimensions is introducing a new product and has an expected change in net operating income of $765,000. Tetious Dimensions has a 30 percent marginal tax rate. This project will also produce $220,000 of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project With the Project Accounts receivable Inventory Accounts payable $54,000 101,000 67,000 $85,000 184,000 115,000 What is the...

Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000....

Homework Answers

Add Answer to:
Racin' Scooters is introducing a new product and has an expected change in EBIT of $425,000....

Post as a guest

Earn Coins