Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles​ (who wants to ride on a cloudy day​ anyway?) The proposed project has the following​ features;​• The firm just spent​ $300,000 for a marketing study to determine consumer demand​ (@ t=0).​• Aero Motorcycles purchased the land the factory will be built on 5 years ago for​ $2,000,000 and owns it outright​ (that is, it does not have a​ mortgage). The land has a current market value of​ $2,600,000.​• The project has an initial cost of​ $20,000,000 (excluding​ land, hint: the land is not subject to​ depreciation).​• If the project is​ undertaken, at t​ = 0 the company will need to increase its inventories by​ $3,500,000, accounts receivable by​ $1,500,000, and its accounts payable by​ $2,000,000. This net operating working capital will be recovered at the end of the​ project’s life​ (t =​ 10).​• If the project is​ undertaken, the company will realize an additional​ $8,000,000 in sales over each of the next ten years.​ (i.e. sales in each year are​ $8,000,000)​• The company’s operating cost​ (not including​ depreciation) will equal​ 50% of sales.​• The company’s tax rate is 35 percent.​• Use a​ 10-year straight-line depreciation schedule.​• At t​ = 10, the project is expected to cease being economically viable and the factory​ (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase​ price).​• The project’s WACC​ = 10 percent​• Assume the firm is profitable and able to use any tax credits​ (i.e. negative​ taxes).What is the operating cash flow​ @ t=1?  Round to nearest whole dollar value.What is the operating cash flow​ @ t=2?  Round to nearest whole dollar value.What are the after tax proceeds from the sale of the factory​ (i.e., ATSV)?  Round to nearest whole dollar value.What is the total cash flow at​ t=10? Round to nearest whole dollar value.What is the​ project's NPV?  Round to nearest whole dollar value. please provide the steps.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk
Section: Chapter Questions
Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...
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Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles​ (who wants to ride on a cloudy day​ anyway?) The proposed project has the following​ features;​• The firm just spent​ $300,000 for a marketing study to determine consumer demand​ (@ t=0).​• Aero Motorcycles purchased the land the factory will be built on 5 years ago for​ $2,000,000 and owns it outright​ (that is, it does not have a​ mortgage). The land has a current market value of​ $2,600,000.​• The project has an initial cost of​ $20,000,000 (excluding​ land, hint: the land is not subject to​ depreciation).​• If the project is​ undertaken, at t​ = 0 the company will need to increase its inventories by​ $3,500,000, accounts receivable by​ $1,500,000, and its accounts payable by​ $2,000,000. This net operating working capital will be recovered at the end of the​ project’s life​ (t =​ 10).​• If the project is​ undertaken, the company will realize an additional​ $8,000,000 in sales over each of the next ten years.​ (i.e. sales in each year are​ $8,000,000)​• The company’s operating cost​ (not including​ depreciation) will equal​ 50% of sales.​• The company’s tax rate is 35 percent.​• Use a​ 10-year straight-line depreciation schedule.​• At t​ = 10, the project is expected to cease being economically viable and the factory​ (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase​ price).​• The project’s WACC​ = 10 percent​• Assume the firm is profitable and able to use any tax credits​ (i.e. negative​ taxes).What is the operating cash flow​ @ t=1?  Round to nearest whole dollar value.What is the operating cash flow​ @ t=2?  Round to nearest whole dollar value.What are the after tax proceeds from the sale of the factory​ (i.e., ATSV)?  Round to nearest whole dollar value.What is the total cash flow at​ t=10? Round to nearest whole dollar value.What is the​ project's NPV?  Round to nearest whole dollar value. please provide the steps. 

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