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 1,200 units in year 1; 1,125 units in year 2; and 1,000 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 $144,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $28,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 12 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow

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
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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 1,200 units in year 1; 1,125 units in year 2; and 1,000 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 $144,000 in assets,
which can be depreciated using bonus depreciation. The
actual market value of these assets at the end of year 3 is
expected to be $28,000. NWC requirements at the beginning
of each year will be approximately 30 percent of the projected
sales during the coming year. The tax rate is 21 percent and
the required return on the project is 12 percent.
What is the operating cash flow for the project in year 2?
Note: Enter your answer as a whole number.
Operating cash flow
M
Transcribed Image Text: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 1,200 units in year 1; 1,125 units in year 2; and 1,000 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 $144,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $28,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 12 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow M
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