Stockinger Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $ 296,000 Expected life of the project 4 Salvage value of equipment $ 0 Annual sales $ 620,000 Annual cash operating expenses $ 444,000 Working capital requirement $ 30,000 One-time renovation expense in year 3 $ 88,000 The company’s income tax rate is 30% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The total cash flow net of income taxes in year 3 is:
Stockinger Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $ 296,000 Expected life of the project 4 Salvage value of equipment $ 0 Annual sales $ 620,000 Annual cash operating expenses $ 444,000 Working capital requirement $ 30,000 One-time renovation expense in year 3 $ 88,000 The company’s income tax rate is 30% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The total cash flow net of income taxes in year 3 is:
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...
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Stockinger Corporation has provided the following information concerning a capital budgeting project:
| Investment required in equipment | $ 296,000 |
|---|---|
| Expected life of the project | 4 |
| Salvage value of equipment | $ 0 |
| Annual sales | $ 620,000 |
| Annual cash operating expenses | $ 444,000 |
| $ 30,000 | |
| One-time renovation expense in year 3 | $ 88,000 |
The company’s income tax rate is 30% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume
The total cash flow net of income taxes in year 3 is:
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