Margarite's Enterprises is considering a new project. The project will require $325,000 for new fixed assets, $160,000 for additional inventory and $35,000 for additional accounts receivable. Accounts payable is expected to increase by $100,000 and long-term debt is expected to increase by $300,001. The project has a 5-year life. The fixed assets will belong in a 30% CCA class. At the end of the project, the fixed assets can be sold for 25% of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $554,000 and costs of $430,000. The tax rate is 35% and the required rate of return is 15%.

What is the amount of the earnings before interest and taxes for the first year of this project?

Question

What is the amount of the earnings before interest and taxes for the first year of this project?

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The Answer of Margarite's Enterprises is considering a new project. The project will require $325,000 for new fixed assets, $160,000 for additional inventory and $35,000 for additional accounts receivable. Accounts payable is expected to increase by $100,000 and long-term debt is expected to increase by $300,001. The project has a 5-year life. The fixed assets will belong in a 30% CCA class. At the end of the project, the fixed assets can be sold for 25% of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $554,000 and costs of $430,000. The tax rate is 35% and the required rate of return is 15%.

What is the amount of the earnings before interest and taxes for the first year of this project?

Margarite's Enterprises Is Considering a New Project