Can you kindly help show the steps for calculating the Working Capital for a product line capable of producing 1.25 Million units per year, total estimated investment cost for the new line is $25 Million, selling price is fixed for the project life at $125 per unit. Working capital based on a 2.5-month supply of raw materials and 1.5 months of combined inventory (WIP and finished goods)? Variable costs per unit include $35 for materials, $20 for manufacturing, and $18 for labor. There are additional fixed operating and maintenance costs totaling $14.25 Million per year. Salvage value equal to 20% of the purchase price at the end of the 6-year project life. The Federal tax rate is 23% and State tax rate is 8.75%. MARR of 18%. Inflation is expected to increase the variable and fixed costs by 6.4% after the first year. In years 3- 6, inflation is expected to decline by 1.2% each year (year 2 inflation is 6.4%, year 3 is 5.2%, etc.) The project falls under a 7-year MACRS class life. The annual expected sales volume is shown below: Year 1 2 3 4 5 6 525,000 600,000 725,000 800,000 925,000 1,000,000
Can you kindly help show the steps for calculating the
The annual expected sales volume is shown below:
Year 1 2 3 4 5 6
525,000 600,000 725,000 800,000 925,000 1,000,000
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
