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(Determining relevant cash flows) Captain's Cereal is considering introducing a variation of its current breakfast cereal, Crunch Stuff. This new cereal will be similar to the old, with the exception that it will contain sugar-coated marshmallows shaped in the form of stars. The new cereal will be called Crunch Stuff n' Stars. It is estimated that the sales for the new cereal will be $25 million; however, 25 percent of those sales will draw from former Crunch Stuff customers who have switched to Crunch Stuff n' Stars and who would not have switched if the new product had not been introduced. What is the relevant sales level to consider when deciding whether or not to introduce Crunch Stuff n' Stars? The relevant sales level to consider when deciding whether to introduce Crunch Stuff n' Stars is 5 (Round to the nearest dollar.) (Calculating changes in net operating working capital) Duncan Motors is introducing a new product and has an expected change in net operating income of $320,000. Duncan Motors has a 32 percent marginal tax rate. This project will also produce $55,000 of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project Accounts receivable $32,000 Inventory 20,000 Accounts payable 44,000 What is the project's free cash flow in year 1? With the Project $28,000 38,000 91,000 The free cash flow of the project in year 1 is $ (Round to the nearest dollar.) (Inflation and project cash flows) If the price of a gallon of regular gasoline is $2.44 and the anticipated rate of inflation in energy prices is such that the cost of gasoline is expected to rise by 7 percent per year, what is the expected price per gallon in 7 years? The expected price per gallon of gas in 7 years is $ (Round to two decimal places.)