Computing net initial investment


1) Select two public corporations in industry with which you are well-known – one which has obtained another company and operates internationally and one which doesn’t have history of mergers and acquisitions and operates only within U.S.

2) A firm is considering the line of contact lens production. New production line will cost= $210,000 Net working capital is expected to rise by $40,000. The new line will be declined over its seven year life by using straight line depreciation (suppose no salvage value for this computation). Revenues are expected to raise $80,000 the first year and increase at a rate of= $8000 a year thereafter (that is yr 1 =80,000; yr 2 = 88,000). Operating costs are likely to jump= $50,000 in first year and increase at the rate of= $5000 per year after that. After 7 years it is estimated that machine will have salvage value of= $25,000. Firm has the marginal tax rate of= 40%. Compute the net initial investment (CF0), annual cash flows, and terminal value.

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Finance Basics: Computing net initial investment
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