Calculate the initial outlay of the project calculate the


Macro Incorporated is the manufacturer of mini-excavators and is considering producing a new line of equipment in an effort to increase its market share. The new production line will cost $2, 550,000 for manufacturing the parts and an additional $630,000 is needed for installation. The equipment falls into the MACRS 3-yr class, and would be sold after four years for $600,000.

The equipment line will generate additional annual revenues of $950,000 in year 1, and $1,250,000 in the following years until the sale of the equipment. The project will attract additional annual operating expenses of $600,000. An inventory investment of $253,000 is required during the life of the project. Macro is in the 20 percent tax bracket, and its existing cost of capital is 6 percent.

A. Calculate the initial outlay of the project.

B. Calculate the annual after-tax operating cash flow for Years 1 - 4. (PLEASE PAY SPECIAL ATTENTION TO YEAR 4)

Request for Solution File

Ask an Expert for Answer!!
Financial Management: Calculate the initial outlay of the project calculate the
Reference No:- TGS02701989

Expected delivery within 24 Hours