(SOLVED) You are considering opening another restaurant in the Texas Burgers chain. The new restaurant will have annual revenue of $360,000 and operating expenses of $180,000.

Question

You are considering opening another restaurant in the Texas Burgers chain. The new restaurant will have annual revenue of $360,000 and operating expenses of $180,000. The annual depreciation and amortization for the assets used in the restaurant will equal $60,000. An annual capital expenditure of $9,500 will be required to offset wear-and-tear on the assets used in the restaurant, but no additions to working capital will be required. The marginal tax rate will be 40 percent.

Calculate the incremental annual after-tax free cash flow for the project.

Incremental annual after-tax free cash flow =?

Expert Solution Preview

Incremental annual after-tax free cashflow = (Annual Revenue - operating expenses) * (1-tax rate) + Depreciation  * tax rate - capital expenditure

Ans = .....