RelativeResourceManager;JSESSIONIDVISTA=TCx3Lk3Qm07dcXQv5DQ77JhvPdSwmRG0GMxGd1QXvFbJJB90F5mw!8335216

RelativeResourceManager;JSESSIONIDVISTA=TCx3Lk3Qm07dcXQv5DQ77JhvPdSwmRG0GMxGd1QXvFbJJB90F5mw!8335216

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Kean University College of Business and Public Administration and Corporate Finance II. Problem 1 Burress Beverages is considering a project where they would open a new facility in Seattle, Washington. The company’s CFO has assembled the following information regarding the proposed project: It would cost $500,000 today (at t = 0) to construct the new facility. The cost of the facility will be depreciated using the following depreciation schedule: MACRS Depreciation Year Rates 1 0.33 2 0.45 3 0.15 4 0.07 If the company opens the facility, it will need to increase its inventory by $100,000 at t = 0. $70,000 of this inventory will be financed with accounts payable. The CFO has estimated that the project will generate the following amount of revenue over the next three years: Year 1 Revenue = $1.0 million Year 2 Revenue = $1.2 million Year 3 Revenue = $1.5 million Operating costs excluding depreciation equal 70% of revenue. The company plans to abandon the facility after three years. At t = 3, the project’s estimated salvage value will be $200,000. At t = 3, the company will also recover the net operating working capital investment that it made at t = 0. The current price of Burress Beverages’ 12 percent coupon, semiannual payment,
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/08/2011 for the course ACCT 3100 taught by Professor Yamoh during the Spring '11 term at Kean.

Page1 / 3

RelativeResourceManager;JSESSIONIDVISTA=TCx3Lk3Qm07dcXQv5DQ77JhvPdSwmRG0GMxGd1QXvFbJJB90F5mw!8335216

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online