Problem 12-13 Project Cash Flows (LG12-3) You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $460 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $255 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $183,000 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 $41,000. NWC requirements at the beginning of each year will be approximately 20 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. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow $ 0 (275,000.00) 1 Answer is not complete. 2

Problem 12-13 Project Cash Flows (LG12-3) You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $460 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $255 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $183,000 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 $41,000. NWC requirements at the beginning of each year will be approximately 20 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. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow $ 0 (275,000.00) 1 Answer is not complete. 2

Name: Problem 12-13 Project Cash Flows (LG12-3)You are evaluating a project
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Description: Problem 12-13 Project Cash Flows (LG12-3)You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate thesales price of The Ultimate to be $460 per unit and sales volume to be 1,00

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 12PROB

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