ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The...

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ABC Corporation has hired you to evaluate a new FOUR yearproject for the firm. The project will require the purchase of a$792,100.00 work cell. Further, it will cost the firm $52,700.00 toget the work cell delivered and installed. The work cell will bestraight-line depreciated to zero with a 20-year useful life. Theproject will require new employees to be trained at a cost of$66,000.00. The project will also use a piece of equipment the firmalready owns. The equipment has been fully depreciated, but has amarket value of $7,400.00. Finally, the firm will invest $11,200.00in net working capital to ensure the project has sufficientresources to be successful.
The project will generate annual sales of $915,000.00 withexpenses estimated at 40.00% of sales. Net working capital will beheld constant throughout the project. The tax rate is 36.00%.
The work cell is estimated to have a market value of $492,000.00at the end of the fourth year. The firm expects to reclaim 82.00%of the final NWC position.
The cost of capital is 15.00%.
What is the cash flow to start the project in year 0, the yearlyoperating cash flow, terminal cash flow, and the NPV the project ifwe end the project after 4 years?

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Answer 1 Calculation of the cash flow to start the project in year 0 Year 0 Purchase cost of work cell 79210000 Delivery and installation cost of work cell 5270000 Employee Training cost 6600000 Investment in net working capital 1120000 Cash flow in Year 0 92200000 Answer 2 See Answer

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ABC Corporation has hired you to evaluate a new FOUR yearproject for the firm. The project will require the purchase of a$792,100.00 work cell. Further, it will cost the firm $52,700.00 toget the work cell delivered and installed. The work cell will bestraight-line depreciated to zero with a 20-year useful life. Theproject will require new employees to be trained at a cost of$66,000.00. The project will also use a piece of equipment the firmalready owns. The equipment has been fully depreciated, but has amarket value of $7,400.00. Finally, the firm will invest $11,200.00in net working capital to ensure the project has sufficientresources to be successful.The project will generate annual sales of $915,000.00 withexpenses estimated at 40.00% of sales. Net working capital will beheld constant throughout the project. The tax rate is 36.00%.The work cell is estimated to have a market value of $492,000.00at the end of the fourth year. The firm expects to reclaim 82.00%of the final NWC position.The cost of capital is 15.00%.What is the cash flow to start the project in year 0, the yearlyoperating cash flow, terminal cash flow, and the NPV the project ifwe end the project after 4 years?