Business, 14.12.2019 04:31 najerajulio

Incremental costs - initial and terminal cash flow

newcastle coal company is considering a project that requires an investment in new equipment of $3,600,000, with an additional $180,000 in shipping and installation costs. newcastle estimates that its accounts receivable and inventories need to increase by $720,000 to support the new project, some of which is financed by a $288,000 increase in spontaneous liabilities (accounts payable and accruals).

the total cost of newcastle's new equipment is and consists of the price of the new equipment plus the

in contrast, newcastle's initial investment outlay is

suppose newcastle's new equipment is expected to sell for $600,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net working capital investment. the company chose to use straight-line depreciation, and the new equipment was fully depreciated by the end of its useful life. if the firm's tax rate is 40%, what is the project's total termination cash flow?

a. $600,000
b. $672,000
c. $792,000
d. $360,000

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Incremental costs - initial and terminal cash flow

newcastle coal company is considerin...