Calculating Free Cash Flows Assignment | Homework For You
June 2nd, 2020
Problem 11-6 (Calculating free cash flows) Spartan Stores is expanding operations with the introduction of a new distribution center. Not only will sales increase but investment in inventory will decline due to increased efficiencies in getting inventory to showrooms. As a result of this new distribution center, Spartan expects a change in EBIT of $1,000,000. 
Although inventory is expected to drop from $81,000 to $60,000, accounts receivables are expected to climb as a result of increased credit sales from $87,000 to $150,000. In addition, accounts payable are expected to increase from $64,000 to $87,000. This project will also produce $300,000 of bonus depreciation in year 1 and Spartan Stores is in the 32 percent marginal tax rate. What is the project’s free cash flow in year 1? The project’s free cash flow in year 1 is $ (Round to the nearest dollar)Get Finance homework help today
Although inventory is expected to drop from $81,000 to $60,000, accounts receivables are expected to climb as a result of increased credit sales from $87,000 to $150,000. In addition, accounts payable are expected to increase from $64,000 to $87,000. This project will also produce $300,000 of bonus depreciation in year 1 and Spartan Stores is in the 32 percent marginal tax rate. What is the project’s free cash flow in year 1? The project’s free cash flow in year 1 is $ (Round to the nearest dollar)Get Finance homework help today
