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rewona [7]
3 years ago
13

Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in

an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $5 million to setup and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $12 million during this year and depreciation expense will be another $3 million. THSI will require no working capital for this investment. THSI's marginal tax rate is 35%.Required:1. Ignoring the original investment of $5 million, what is THSI's free cash flow for the first and only year of operation?a. $5.0 millionb. $3.75 millionc. $8.0 milliond. $6.25 million
Business
1 answer:
expeople1 [14]3 years ago
8 0

Answer:

Option D. $6.25 Million

Explanation:

The Free Cash Flow can be calculated using the following formula (Ignoring investment):

Free Cash Flow = (Revenue - Operating Expenses)   Minus  Tax

Here

Revenue is $20 Million

Operating Expenses are $12 Million

And

Tax is not given however tax rate is given which is 35% here. For tax purposes, we will assume that the depreciation is tax allowable expense, so

Tax = (Revenue - Operating Expenses - Depreciation) * Tax rate

By putting values we have:

Tax = ($20m - $12m - $3m) = $1.75 Million

The cash impact is taken while calculating the Free cash flow. This free cash flow method is also used in IRR, NPV, discounted payback method, etc.

By putting values in the above bold equation, we have:

Free Cash Flow = ($20m - $12m) - $1.75 = $6.25 Million

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Indicate whether each of the following transactions represents an increase in net exports, a decrease in net exports, an increas
Alborosie

Answer:

Net export decreases and net capital outflow decreases

Net export increases and net capital outflow decreases

Net export decreases and net capital outflow increases

Net export increases and net capital outflow increases

Explanation:

Net export = export - import

export would comprise of goods and services produced in the US that are been sold to foreign countries

Import would comprise of foreign produced goods and services that are been sold in the US

Net export would increase when export occurs and decrease when import occurs

Net capital outflow measures the flow of funds in a country. It is the difference between purchase of foreign assets by the citizens of a country and the purchase of domestic assets by foreigners

Net capital outflow = purchase of foreign assets by citizens - purchase of domestic assets by foreigners

Net capital outflow is positive when purchase of foreign assets occur and negative when purchase of domestic assets occur.

1. the setting up of the factory is an import and there is a flow of funds into the US economy. Thus, net export and net capital flow decrease

2. A Apple computer is produced in the US. The sale to a German constitutes an export but there is a flow of fund into the US economy. net export increase and net capital outflow decreases

3. Sony is not produced in the US. the purchase of the TV constitutes an import and there is a flow of funds out of the US economy. Net export reduces and net capital outflow increases

4. The opening of the fashion company outlet in the UK constitutes an export and there is a flow of funds out of the US. Net export increases and net capital outflow increases

7 0
2 years ago
The present value of a future amount of money is the amount ​that, if invested​ today, will grow to be as large as that ​ _____
svetlana [45]

Answer: A. Present; B. Taken; C. Future; D. Present

Explanation:

The present value of a future amount of money is the amount ​that, if invested​ today, will grow to be as large as that ​present amount when the interest that it will earn is​ taken into account.

The calculation that we use to convert a​ future amount of money to its​ present value is called discounting.

8 0
3 years ago
The quality team at Nigre, a cosmetics company, is continuously involved in monitoring the production process to ensure that the
omeli [17]

Answer:

Control

Explanation:

According to my research on the different activities of process management, I can say that based on the information provided within the question Nigre is engaged in the Control Activity. This activity focuses on making sure all procedures, techniques, and policies are followed accordingly in order to meet all of the organizations goals and basically minimize the risk of defective products or problems occurring. Which is what Nigre is doing by monitoring the production process and making sure everything is meeting the specifications.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

5 0
2 years ago
Total surplus with a tax is equal to a. consumer surplus minus producer surplus. b. consumer surplus plus producer surplus plus
anygoal [31]

Answer:

Option (b) is correct.

Explanation:

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6 0
3 years ago
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