Ive been working on this forever!!! I think the problem is on the depriciation ,
ID: 2707775 • Letter: I
Question
Ive been working on this forever!!!
I think the problem is on the depriciation , do I use 33.33 % on year 1 and 3?
Please help I cant figure out year 1 and 3
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $360 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $205 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $153,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $31,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 39 percent and the required return on the project is 12 percent. (Use SL depreciation table)
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.)
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $360 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $205 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $153,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $31,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 39 percent and the required return on the project is 12 percent. (Use SL depreciation table)
Ive been working on this forever!!! I think the problem is on the depriciation , do I use 33.33 % on year 1 and 3? Please help I cant figure out year 1 and 3 You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $360 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $205 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $153,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $31,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 39 percent and the required return on the project is 12 percent. (Use SL depreciation table) What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.)Explanation / Answer
Year 0 Year 1 Year 2 Year 3 Sales - 360,000.00 450,000.00 477,000.00 Variable Costs - 205,000.00 256,250.00 271,625.00 Fixed Costs - 100,000.00 100,000.00 100,000.00 Depreciation - 51,000.00 51,000.00 51,000.00 EBT - 4,000.00 42,750.00 54,375.00 Less: Tax - 1,560.00 16,672.50 21,206.25 PAT - 2,440.00 26,077.50 33,168.75 Add: Depn. - 51,000.00 51,000.00 51,000.00 Yearly Cash flow - 53,440.00 77,077.50 84,168.75 Outflow of WC 72,000.00 90,000.00 95,400.00 - Initial Investment 153,000.00 - - - Resale value of asset - - - 31,000.00 Inflow of WC - 72,000.00 90,000.00 95,400.00 total (225,000.00) 35,440.00 71,677.50 210,568.75 Please consider the time devoted to make this reply by rating this answer as 5star. Thank u in advance. God bless u :)
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