Explore BrainMass

Explore BrainMass

    Capital Budgeting for Fly by Night Airlines

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    13-14. The president of Fly-by-Night Airlines has asked you to evaluate the proposed acquisition of a new jet. The jet's price is $40 million, and it is classified in the 10 years MACRS class. The purchase of the jet would require an increase in net working capital of $200.000. The jet would increase the firm's before-tax revenues by $20 million per year, but would also increase operating costs by $5 million per year. The jet is expected to be used for three years and then sold for $25 million. The firm's marginal tax rate is 40%.

    b. What is the amount of the operating cash flow each year?
    c. What is the amount of the nonoperating cash flow in the third year?
    d. What is the amount of the net cash flow each year?

    © BrainMass Inc. brainmass.com June 4, 2020, 1:38 am ad1c9bdddf

    Solution Summary

    This solution helps with a problem about capital budgeting