"Orion S.A" is considering a new investment which will entail an immediate capital expenditure of €1,000,000, an increase in account receivables by €200,000, and an increase in accounts payable by €100,000. The investment will be depreciated on a straight-line basis over 5 years with no expected salvage value. The sales and operating expenses are expected to increase by €800,000 and €100,000 per year respectively, over the 5-year life of the project. The investment is to replace an existing one which is fully depreciated, but it can be sold for €250,000. "Orion S.A." is in the 20 percent tax bracket and the cost of capital is 5 percent. The net cash flow of the project for the 1st year will be: Select one: a. Inflow €650,000 b. Inflow €600,000 c. None of the proposed answers is correct

"Orion S.A" is considering a new investment which will entail an immediate capital expenditure of €1,000,000, an increase in account receivables by €200,000, and an increase in accounts payable by €100,000. The investment will be depreciated on a straight-line basis over 5 years with no expected salvage value. The sales and operating expenses are expected to increase by €800,000 and €100,000 per year respectively, over the 5-year life of the project. The investment is to replace an existing one which is fully depreciated, but it can be sold for €250,000. "Orion S.A." is in the 20 percent tax bracket and the cost of capital is 5 percent. The net cash flow of the project for the 1st year will be: Select one: a. Inflow €650,000 b. Inflow €600,000 c. None of the proposed answers is correct

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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