CSC is evaluating new project to produce encapsulators.The initial investment in plant and equipment is $500,000. Sales of encapsulators in year 1 are forecasted at $200,000 and costs at $100,000. Both are expected to increase by 10% a year. Profits are taxed at 30%. Working capital in each year consists of inventories of raw materials and is forecasted at 20% of sales in the following year. The project will last five years and the equipment at the end of this period will have scrap value of $50,000 but could be sold for $ 30,000. For tax purposes the equipment can be depreciated straight line over these years. Forecast cash flows from the project.

CSC is evaluating new project to produce encapsulators.The initial investment in plant and equipment is $500,000. Sales of encapsulators in year 1 are forecasted at $200,000 and costs at $100,000. Both are expected to increase by 10% a year. Profits are taxed at 30%. Working capital in each year consists of inventories of raw materials and is forecasted at 20% of sales in the following year. The project will last five years and the equipment at the end of this period will have scrap value of $50,000 but could be sold for $ 30,000. For tax purposes the equipment can be depreciated straight line over these years. Forecast cash flows from the project.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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