The Taylor Mountain Uranium Company currently has annual cash revenues of $1.5 million and annual cash expenses of $700,
Posted: Wed Jul 06, 2022 6:28 pm
The Taylor Mountain Uranium Company currently has annual cashrevenues of $1.5 million and annual cash expenses of $700,000.Depreciation amounts to $200,000 per year. These figures areexpected to remain constant for the foreseeable future (at least 15years). The firm’s marginal tax rate is 40 percent.A new high-speed processing unit costing $1.2 million is beingconsidered as a potential investment designed to increase thefirm’s output capacity. This new piece of equipment will have anestimated usable life of 8 years and a $0 estimated salvage value.If the processing unit is bought, Taylor’s annual revenues areexpected to increase to $2.1 million and annual expenses (exclusiveof depreciation) will increase to $1,000,000. Annual depreciationwill increase to $300,000. Assume that no increase in net workingcapital will be required as a result of this project.
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