The Board of Directors of Waste Free Chemicals is considering the acquisition of a new chemical processor. The processor is priced at $600,000 but would require $60,000 in transportation costs and $40,000 for installation. The processor will have a useful life of 10 years. The project will require Waste Free to increase its investment in accounts receivable by $80,000 and will also require an additional investment in inventory of $150,000. The firm's marginal tax rate is 40 percent. How much is the initial cash outlay of the processor?
A) $700,000
B) $850,000
C) $930,000
D) $1,040,000
The introduction of a new product at Elia Pharmaceuticals will require a $450,000 increase in inventory, a $730,000 increase in Accounts Receivable, and a $180,000 increase in Accounts Payable. Introduction of the product will also require a $700,000 expenditure for advertising. The increase in net working capital required for the introduction of this product is
A) $1,180,000.
B) $1,000,000.
C) $1,360,000.
D) $1,700,000.
Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal?
A) Training expense
B) Working capital investments
C) Installation costs of an asset
D) Before-tax selling price of old machine
SpaceTech is considering a new project with the following projections for Year 2.
Year 2 Projections
EBIT $400,000
Interest Expense $20,000
Depreciation Expense $40,000
Tax Rate 40%
Incremental Net Working
Capital Needs $200,000
A) $130,000
B) $180,000
C) $230,000
D) $280,000
In year 3 of project Gamma. sales were $3,000,0000, cost of goods sold $1,500,000, other cash costs were $400,000, depreciation was $600,000 and interest expense was $250,000. The company's marginal tax rate is 35%. Compute operating cash flow for year 3 of project Gamma.
A) $925,000
B) $675,000
C) $500,000
D) $325,000
