You are evaluating a project for your company. You estimate the sales price to be $200 per unit and sales volume to be 3,000 units in year 1; 4,000 units in year 2; and 2,500 units in year 3. The project has a three-year life. Variable costs amount to $50 per unit and fixed costs are $150,000 per year. The project requires an initial investment of $200,000 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 $30,000. NWC requirements at the beginning of each year will be approximately 10 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What is the operating cash flow for the project in year 2? Multiple Choice O O о о $302,833 $369,500 $383,333 $397,500
You are evaluating a project for your company. You estimate the sales price to be $200 per unit and sales volume to be 3,000 units in year 1; 4,000 units in year 2; and 2,500 units in year 3. The project has a three-year life. Variable costs amount to $50 per unit and fixed costs are $150,000 per year. The project requires an initial investment of $200,000 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 $30,000. NWC requirements at the beginning of each year will be approximately 10 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What is the operating cash flow for the project in year 2? Multiple Choice O O о о $302,833 $369,500 $383,333 $397,500
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are evaluating a project for your company. You estimate the sales price to be $200 per unit and
sales volume to be 3,000 units in year 1; 4,000 units in year 2; and 2,500 units in year 3. The project
has a three-year life. Variable costs amount to $50 per unit and fixed costs are $150,000 per year.
The project requires an initial investment of $200,000 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 $30,000. NWC requirements at the beginning of each year will be
approximately 10 percent of the projected sales during the coming year. The tax rate is 21 percent
and the required return on the project is 10 percent. What is the operating cash flow for the project in
year 2?
Multiple Choice
о
O
$302,833
$369,500
$383,333
$397,500
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