You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of $5.9 million and cost of goods sold of $3.54 million. You will be depreciating a $2 million machine for 5 years using straight-line depreciation. Your tax rate is 33%. Finally, you expect working capital to increase from $210,000 in year 2 to $ 295,000 in year 3. What are your pro forma earnings for year 3? What are your pro forma free cash flows for year 3?

You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of $5.9 million and cost of goods sold of $3.54 million. You will be depreciating a $2 million machine for 5 years using straight-line depreciation. Your tax rate is 33%. Finally, you expect working capital to increase from $210,000 in year 2 to $ 295,000 in year 3. What are your pro forma earnings for year 3? What are your pro forma free cash flows for year 3?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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