Expansion Project A Firm is considering the Introduction of a Product. The Firm's Marginal Tax...
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Expansion Project A Firm is considering the Introduction of a Product. The Firm's Marginal Tax Rate is 40%. - The Expected Life of the Project is 3 Years. - The Project requires an Initial Increase in Net Operating Working Capital of $1,500. - The Project requires an Investment in Equipment. The Cost of the Equipment is $28,000 and there is an Additional Charge of $12,000 for Shipping and Installation. The Equipment Falls into the 3-Year MACRS Depreciation Class and the Expected Salvage Value at the End of the Project is $6,000. - The Firm has already spend $1,500 on a Marketing Analysis that shows an Increase in Revenues from the Project of $8,000 in Year 1, $12,000 in Year 2 and $10,000 in Year 3. The Project will also lead to a reduction in operating costs of $2,000 in Year 1, $5,000 in Year 2 and $4,000 in Year 3. 3-Year MACRS Depreciation Rates: Year 1: 33%, Year 2: 45%, Year 3: 15%, Year 4: 7% What is the Cash Flow at Year 2? $18,240 $17,400 $16,600 $16,400
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