2.

You are evaluating a product for your company. You estimate the sales price of product to be $160 per unit and sales volume to be 10,600 units in year 1:25,600 units tn year 2; and 5,600 units in year 3. The project has a 3 year life, Variable costs amount to $85 per unit and fixed costs are $2,06,000 per year. The project requires an inital investment of $342,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $46,000. NWC requirements at the beginning of each year will be approximately 16% of the projected sales during the coming yeat. The tax rate is 21% and the required retum on the project is 115 . What will the year 2 free cash flow for this project be? Multiple Choice. $1000.000 $137000 $1,600,000 $1,378,000 $1890000 $1,264,000 Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 14 percent, and that the maximum aliowable payback and discounted paryback statistic for the project are 2 and 3 years, respectively. Use the payback decision rule to evaluate this project; should it be accepted or rejected? Murple Choice is years, sccept 2.59 years iejoct 116 years, accept 2.59 years, reject 0 yeors, accept 4.00 years, reject