The Datum Co. has recently completed a $200, 000, two - year marketing study. Based on the results of the study, Datum has estimated that 6, 000 units of its new electro - optical data scanner could be sold annually over the next 8 years, at a price of $8, 000 each. Variable costs per unit are $4,400, and fixed costs total $5.4 million per year. Start - up costs include $17.6 million to build production facilities, $1.5 million for land, and $4 million in net working capital. The $17.6 million facility will be depreciated on a straight - line basis to a value of zero over the eight — year life of the project. At the end of the projects life, the facilities (including the land) will be sold for an estimated $4.7 million. The value of the land is not expected to change during the eight year period. Finally, start — up would also entail tax - deductible expenses of $0.4 million at year zero. Datum is an ongoing, profitable business and pays taxes at a 35% rate on all income and capital gains. Datum has a 20% opportunity cost for projects such as this one. What operating cash flow does Datum's project generate each year during its life? $9.1 million $14.0 million $11.3 million $21.6 million Continuing the previous problem, what is the initial cash flow at year 0? $17.6 million $23.36 million $19.1 million $23.56 million Continuing the previous problem, what is the terminal year cash flow? $14.88 million $7.58 million $20.00 million $18.88 million What is the net present value of Datum's project? $21.76 million $45.12 million $23.36 million $0.0 million
The Datum Co. has recently completed a $200, 000, two - year marketing study. Based on the results of the study, Datum has estimated that 6, 000 units of its new electro - optical data scanner could be sold annually over the next 8 years, at a price of $8, 000 each.
Variable costs per unit are $4,400, and fixed costs total $5.4 million per year. Start - up costs include $17.6 million to build production facilities, $1.5 million for land, and $4 million in net working capital. The $17.6 million facility will be depreciated on a straight - line basis to a value of zero over the eight — year life of the project. At the end of the projects life, the facilities (including the land) will be sold for an estimated $4.7 million. The value of the land is not expected to change during the eight year period. Finally, start — up would also entail tax - deductible expenses of $0.4 million at year zero. Datum is an ongoing, profitable business and pays taxes at a 35% rate on all income and
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