Author Question: John Kay Inc. is considering the installation of a new production line to make automated flying ... (Read 337 times)

amal · **on:** Apr 25, 2021

John Kay Inc. is considering the installation of a new production line to make automated flying shuttles for weaving machines. The capital cost of the equipment is $2.2 million. The machines on the new line are classified as 15-year property. Kay plans to operate the line for two years, at which time the project will end and the assets will be disposed of for $1,000,000. The new line requires an increase in net working capital of $20,000, which would be liquidated at the end of the project. The investment outlays would occur immediately.
Sales are expected to be constant at $2,000,000, and operating expenses at $800,000. Assume that all revenues and operating expenses are received (paid) at the end of each of the two years of operations. Kay's marginal tax rate is 35 percent. Kay's cost of capital is 11%. What is initial cash flow for the flying shuttle project?

MACRS Depreciation Rates

Year	10-Year	15-Year
1	10.00%	5.00%
2	18.00%	9.50%
3	14.40%	8.55%

◦ $2,220,000
◦ $2,200,000
◦ $0
◦ -$2,200,000
◦ -$2,220,000

CAPTAINAMERICA · **Reply #1 on:** Apr 25, 2021

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 30% of students answer this correctly