1. Kelly's Corner Bakery purchased a lot in Oil City five years ago at a cost of $600,000. Today, that lot has a market value of $830,000. At the time of the purchase, the company spent $50,000 to level the lot and another $4,400 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1,230,000. What amount should be used as the initial cash flow for this project?

2.

Summer Tyme, Inc., is considering a new 5-year expansion project that requires an initial fixed asset investment of $4.266 million. The fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. The project is estimated to generate $3,792,000 in annual sales, with costs of $1,516,800.

Required:

If the tax rate is 34 percent, what is the OCF for this project?

3.

Winnebagel Corp. currently sells 21,000 motor homes per year at $31,500 each, and 8,400 luxury motor coaches per year at $59,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 13,300 of these campers per year at $8,400 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 3,150 units per year, and reduce the sales of its motor coaches by 630 units per year.

Required :

What is the amount to use as the annual sales figure when evaluating this project?