Problem 12-11 Operating Cash Flow (LG12-3) ou are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff- ny to be $470 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units in year 3. The project has a 3- ear life. Variable costs amount to $260 per unit and fixed costs are $100,000 per year. The project requires an initial investment of 144,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets t the end of year 3 is expected to be $28,000. NWC requirements at the beginning of each year will be approximately 30 percent of he projected sales during the coming year. The tax rate is 30 percent and the required return on the project is 12 percent. What is the operating cash flow for the project in year 2? (Enter your answer as a whole number.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Problem 12-11 Operating Cash Flow (LG12-3)
You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-
any to be $470 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units in year 3. The project has a 3-
year life. Variable costs amount to $260 per unit and fixed costs are $100,000 per year. The project requires an initial investment of
$144,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets
at the end of year 3 is expected to be $28,000. NWC requirements at the beginning of each year will be approximately 30 percent of
he projected sales during the coming year. The tax rate is 30 percent and the required return on the project is 12 percent.
What is the operating cash flow for the project in year 2? (Enter your answer as a whole number.)
Operating cash flow
Transcribed Image Text:Problem 12-11 Operating Cash Flow (LG12-3) You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff- any to be $470 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units in year 3. The project has a 3- year life. Variable costs amount to $260 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $144,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $28,000. NWC requirements at the beginning of each year will be approximately 30 percent of he projected sales during the coming year. The tax rate is 30 percent and the required return on the project is 12 percent. What is the operating cash flow for the project in year 2? (Enter your answer as a whole number.) Operating cash flow
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