You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $470 per unit and sales volume to be 1,000 units in year 1; 900 units in year 2; and 1,325 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 $186,000 in assets, which 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 $42,000. 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 11 percent. What is the operating cash flow for the project in year 2? (Enter your answer as a whole number.) Operating cash flow

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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**Project Evaluation for The Farstroke Golf Club**

You are assessing a project for The Farstroke golf club, which promises to correct an issue with a slice. The estimated sales price of The Farstroke is set at $470 per unit. Sales volume projections are 1,000 units in year 1, 900 units in year 2, and 1,325 units in year 3. This project spans a 3-year life.

**Cost and Investment Details:**

- **Variable Costs:** $260 per unit
- **Fixed Costs:** $100,000 annually
- **Initial Investment:** $186,000 in assets

Assets will be depreciated straight-line to zero over the project's 3-year life. The expected market value of these assets at the end of year 3 is $42,000. 

**Net Working Capital (NWC):**

Requirements at the beginning of each year are approximately 25% of the projected sales for the coming year.

**Financial Considerations:**

- **Tax Rate:** 21%
- **Required Return on Project:** 11%

**Task:**

Calculate the operating cash flow for the project in year 2. Enter the result as a whole number.

**Input Field:**

- **Operating Cash Flow:** [___]
Transcribed Image Text:**Project Evaluation for The Farstroke Golf Club** You are assessing a project for The Farstroke golf club, which promises to correct an issue with a slice. The estimated sales price of The Farstroke is set at $470 per unit. Sales volume projections are 1,000 units in year 1, 900 units in year 2, and 1,325 units in year 3. This project spans a 3-year life. **Cost and Investment Details:** - **Variable Costs:** $260 per unit - **Fixed Costs:** $100,000 annually - **Initial Investment:** $186,000 in assets Assets will be depreciated straight-line to zero over the project's 3-year life. The expected market value of these assets at the end of year 3 is $42,000. **Net Working Capital (NWC):** Requirements at the beginning of each year are approximately 25% of the projected sales for the coming year. **Financial Considerations:** - **Tax Rate:** 21% - **Required Return on Project:** 11% **Task:** Calculate the operating cash flow for the project in year 2. Enter the result as a whole number. **Input Field:** - **Operating Cash Flow:** [___]
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