K&J Enterprise lnc. has purchased a small motor engine line to go in golf cart. The total purchase cost was $1.5 million, which can generate revenues of $650.000 per year. Direct manufacturing costs are expected to run $220.000 a year and other fixed cost expenditures would be somewhere near $80.000 a year. The O&M cost would be around $45,000 a year, and K&J expects to pay various taxes including income taxes of $58,000. The project would last about 10 years and at that time, the business could be sold for $1 million. Determine the project cash flows over a 10-year period.
K&J Enterprise lnc. has purchased a small motor engine line to go in golf cart. The total purchase cost was $1.5 million, which can generate revenues of $650.000 per year. Direct manufacturing costs are expected to run $220.000 a year and other fixed cost expenditures would be somewhere near $80.000 a year. The O&M cost would be around $45,000 a year, and K&J expects to pay various taxes including income taxes of $58,000. The project would last about 10 years and at that time, the business could be sold for $1 million. Determine the project cash flows over a 10-year period.
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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K&J Enterprise lnc. has purchased a small motor engine line to go in golf cart. The total purchase cost was $1.5 million, which can generate revenues of $650.000 per year. Direct
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