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Fine Ants Inc. is considering a project to produce super ants. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $563,000. Fine Ants also estimates that the revenues (sales) each year over the eight-year life of the project will be $170,000. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $90,000. Fine Ants will finance $412,000 by loan with an interest rate of 7 percent per year. The working capital requirement is $268,000. Fine Ants uses straight-line depreciation and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 30 percent. Obtain the annual cash flow of the first seven years.

a) 77,102.50

b) 77,112.50

c) 77,132.55

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M947465

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