As a manager for Knickerbocker Toys you believe the Holly Hobbie line of dolls is poised for a comeback. Your proposed growth strategy is to offer a full-line of the dolls You can reacquire the rights to the brand for $2,000,000. You expect to make dolls for the next 4 years. New revenues associated with your growth strategy will be $2,500,000 for each year, while costs will be $1,800,000. The brand rights are to be straight line depreciated over the project,after which you plan on selling the brand rights for $600,000. The marginal corporate tax rate is 25%. Working capital will need to increase from $100,000 to $175,000 right away, fall to $150,000 in year 2 and be recovered to the original level in year 3. The net cash flow for year 0 is 2,175,000 , for year

As a manager for Knickerbocker Toys you believe the Holly Hobbie line of dolls is poised for a comeback. Your proposed growth strategy is to offer a full-line of the dolls You can reacquire the rights to the brand for $2,000,000. You expect to make dolls for the next 4 years. New revenues associated with your growth strategy will be $2,500,000 for each year, while costs will be $1,800,000. The brand rights are to be straight line depreciated over the project,after which you plan on selling the brand rights for $600,000. The marginal corporate tax rate is 25%. Working capital will need to increase from $100,000 to $175,000 right away, fall to $150,000 in year 2 and be recovered to the original level in year 3. The net cash flow for year 0 is 2,175,000 , for year

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 22P

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