Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Raghubhai

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 $480 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 $265 per unit and fixed costs are $100,000 per year. The project requires an initial
investment of $189,000 in assets, which can straight-line depreciate to zero. 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
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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 $480 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 $265 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $189,000 in assets, which can straight-line depreciate to zero. 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
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