The following data are projected for a possible investment project: 1 2 3 4 Revenues $130,000 $150,000 $170,000 $190,000 Cost of Goods Sold $ 32,000 $ 38,000 $ 44,000 $ 50,000 Depreciation $ 70,000 $ 50,000 $ 30,000 $ 10,000 EBIT $ 28,000 $ 62,000 $ 96,000 $130,000 Refer to Exhibit 9-2. The project requires an initial investment of $340,000 on equipment. Working capital is anticipated to be variable at 13% of revenues; the working capital investment must be made at the beginning of each period, and will be recovered in full at the end of year 4. Equipment will be sold at its book value at the end of year 4. The tax rate is 38%. What is the net cash flow to the firm in year 4? Group of answer choices $164,600 $195,300 $295,300 $180,600
The following data are projected for a possible investment project: 1 2 3 4 Revenues $130,000 $150,000 $170,000 $190,000 Cost of Goods Sold $ 32,000 $ 38,000 $ 44,000 $ 50,000 Depreciation $ 70,000 $ 50,000 $ 30,000 $ 10,000 EBIT $ 28,000 $ 62,000 $ 96,000 $130,000 Refer to Exhibit 9-2. The project requires an initial investment of $340,000 on equipment. Working capital is anticipated to be variable at 13% of revenues; the working capital investment must be made at the beginning of each period, and will be recovered in full at the end of year 4. Equipment will be sold at its book value at the end of year 4. The tax rate is 38%. What is the net cash flow to the firm in year 4? Group of answer choices $164,600 $195,300 $295,300 $180,600
Chapter2: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 14SP
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Question
Exhibit 9-2
The following data are projected for a possible investment project:
Refer to Exhibit 9-2. The project requires an initial investment of $340,000 on equipment. Working capital is anticipated to be variable at 13% of revenues; the working capital investment must be made at the beginning of each period, and will be recovered in full at the end of year 4. Equipment will be sold at its book value at the end of year 4. The tax rate is 38%.
What is the net cash flow to the firm in year 4?
The following data are projected for a possible investment project:
|
1
|
2
|
3
|
4
|
|
| Revenues |
$130,000
|
$150,000
|
$170,000
|
$190,000
|
| Cost of Goods Sold |
$ 32,000
|
$ 38,000
|
$ 44,000
|
$ 50,000
|
|
$ 70,000
|
$ 50,000
|
$ 30,000
|
$ 10,000
|
|
| EBIT |
$ 28,000
|
$ 62,000
|
$ 96,000
|
$130,000
|
Refer to Exhibit 9-2. The project requires an initial investment of $340,000 on equipment. Working capital is anticipated to be variable at 13% of revenues; the working capital investment must be made at the beginning of each period, and will be recovered in full at the end of year 4. Equipment will be sold at its book value at the end of year 4. The tax rate is 38%.
What is the net cash flow to the firm in year 4?
Group of answer choices
$164,600
$195,300
$295,300
$180,600
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