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Bratton Stone Works is considering an expansion proposal that will require an out- lay of $1 million for land and $5 million for equipment. The equipment will be depreciated under MACRS rules as a 7-year class asset. The salvage value of the equipment at the end of 10 years is expected to be $1 million. The actual life of the project is expected to be 10 years. At the end of 10 years, Bratton hopes to sell the land for $1.8 million. Revenues from the project are expected to be $700,000 per year. Operating costs are expected to be $200,000 per year. The ordinary and capital gains tax rate for Bratton is 40 percent. The project will require an additional invest- ment in working capital of $250,000 in year 0 and $150,000 at the end of year 1. What net cash flow will this project produce in year 10?

Financial Management, Finance

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  • Reference No.:- M91601607

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