An ice-cream company has a new business idea: specially equipped ice-cream trucks can deliver the company's ice-creams to customers' homes and create custom ice-cream flavors right there. Seems like $800,000 would need to be invested right away to buy the right delivery trucks. This project would be tested for 6 years, and at the end of the project all used trucks will be sold and bring the company estimated $290,000 in the after-tax salvage value. The company would also need to set aside $12,000 in cash right away to cover any unforeseen future repairs, and additional $3,000 would be added each year to this cash reserve. The cash reserve will be recovered at the end of the project. The company expects that $180,000 would be generated each year as the operating cash flow. If the company doesn't take any loan, the required return on this project will be 8%, and it'll be used to discount all future estimated cash flows.
If the company does take a loan, it will be an interest-only loan, at 3.5% annual rate, and it will be used to pay for 65% of the initial investment such as the delivery trucks.
Calculate unlevered cash flows for this project. Signs are important!
Year 0 cash flow =$
Cash flow in the intermediate year (for each year) =$
Cash flow in the final year =$
HINT: You will not need to use all numbers that are given in this problem!
custom ice-cream flavors right there.Seems like $800,000 would need to be invested right away to buy the right delivery trucks. This project would be tested for 6 years, and at the end of the project all used trucks will be sold and- bring the company estimated $290,000 in the after-tax salvage value. The company would also need to set aside $12,000 in cash right away to cover any unforeseen future repairs, and additional $3,000 would be added each year to this cash reserve. The cash reserve will be recovered at the end of the project. The company expects that $180,000 would be generated each year as the operating cash flow. If the company doesn't take any loan, the required return on this project will be 8%, and it'll be used to discount all future estimated cash flows. If the company_does take a loan, it will be an interest-only loan, at 3.5% annual rate, and it will be used to pay for 65% of the initial investment such as the delivery trucks.
Calculate unlevered cash flows for this project. Signs are important!
Year O cash flow =$[Select]
Cash flow in the intermediate year (for each year) = $[Select ]
Cash flow in the final year = $ [Select]
HINT: You will not need to use all numbers that are given in this problem!@