2. Incremental costs - Initial and terminal cash flow Consider the case of Acme Manufacturing: Acme Manufacturing is considering a project that requires an investment in new equipment of $3,360,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t = 0 so the equipment will be fully depreciated at the time of purchase. Acme estimates that its accounts receivable and inventories need to increase by $640,000 to support the new project, some of which is financed by a $256,000 increase in spontaneous liabilities (accounts payable and accruals). The company's tax rate is 25%.The after-tax cost of Acme's new equipment is Acme's initial net investment outlay is Suppose Acme's new equipment is expected to sell for $200,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital (NOWC) investment. Remember, that under the new tax law, this equipment was fully depreciated at t = 0. If the firm's tax rate is 25%, what is the project's total termination cash flow?O $150,000 O $534,000 O $434,000 O $200,000

Question

mjvn5862 mjvn5862

10-12-2022
Business

contestada

2. Incremental costs - Initial and terminal cash flow Consider the case of Acme Manufacturing: Acme Manufacturing is considering a project that requires an investment in new equipment of $3,360,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t = 0 so the equipment will be fully depreciated at the time of purchase. Acme estimates that its accounts receivable and inventories need to increase by $640,000 to support the new project, some of which is financed by a $256,000 increase in spontaneous liabilities (accounts payable and accruals). The company's tax rate is 25%.The after-tax cost of Acme's new equipment is Acme's initial net investment outlay is Suppose Acme's new equipment is expected to sell for $200,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital (NOWC) investment. Remember, that under the new tax law, this equipment was fully depreciated at t = 0. If the firm's tax rate is 25%, what is the project's total termination cash flow?O $150,000 O $534,000 O $434,000 O $200,000

Respuesta :

Otras preguntas

explain fajan's rule

Neetuverma Neetuverma · Answer 1 · 2022-12-16T06:04:16+01:00

The project's total termination cash flow for the company is $434,000.

What is a cash flow?

Cash flow is the difference between an entity's net cash inflow and outflow over the course of a specific time period. Positive cash flows are crucial for a company to remain operational and to create value for investors. Cash inflows from operations are payments received from customers for the products or services the business offers. It encompasses the primary revenue streams of an organization, including sales of goods and services, royalties from the use of the company's intellectual property, commissions from sales made on behalf of other companies, and payments paid to suppliers. The majority of cash flows are presumably listed under this category.

Total termination cash flow=640.000-206,000=$434,000

To learn more about cash flow, visit:

https://brainly.com/question/18301012

#SPJ4