You are evaluating a project for your company. You estimate the sales price to be $10 per unit and sales volume to be 3,000 units in year 1; 10,000 units in year 2; and 1,000 units in year 3. The project has a three-year life. Variable costs amount to $3 per unit and fixed costs are $25,000 per year. The project requires an initial investment of $50,000 in assets that will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $10,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 15 percent. What is the operating cash flow for the project in year
2?
A. $40,317
B. $18,700
C. $18,867
D. $39,050
Answer: D
You might also like to view...
Which of the following expense accounts is associated with natural resources??
a. Depreciation expense. b. Amortization expense. c. Depletion expense. d. Capitalization expense.
Which of the following is not a problem inherent in balance sheet presentation?
a. Most assets are valued at cost. b. Varying methods are used for asset valuation. c. Not all items of value to the firm are included as assets. d. Liabilities related to contingencies may not appear on the balance sheet. e. The owners' interest will be indicated.
From the economic system's point of view, the role of ________ is to transform the assortments of products made by producers into the assortments wanted by consumers
A) upstream partners B) marketing intermediaries C) third-party logistics D) price consultants E) factory supervisors
Which of the following does the textbook give as an example of an off-price clothing store that has upgraded its appearance to become more customer-friendly and attractive?
a. J. C. Penney b. Wal-Mart c. Macy’s d. Dillard’s e. T. J. Maxx