You are evaluating a product for your company. You estimate the sales price of product to be $240 per unit and sales volume to be 11,400 units in year 1; 26,400 units in year 2; and 6,400 units in year 3. The project has a 3 year life. Variable costs amount to $165 per unit and fixed costs are $214,000 per year. The project requires an initial investment of $366,000 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 $54,000. NWC requirements at the beginning of each year will be approximately 13% of the projected sales during the coming year. The tax rate is 21% and the required return on the project is 8%. What will the year 2 free cash flow for this project be? Multiple Choice $1,298,760 $1,644,000 $796,760 $1,420,760
You are evaluating a product for your company. You estimate the sales price of product to be $240 per unit and sales volume to be 11,400 units in year 1; 26,400 units in year 2; and 6,400 units in year 3. The project has a 3 year life. Variable costs amount to $165 per unit and fixed costs are $214,000 per year. The project requires an initial investment of $366,000 in assets which will be
Multiple Choice
$1,298,760
$1,644,000
$796,760
$1,420,760
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