Question
9) Delta Inc. is evaluating a new product. The production line for the new product would be set up in an unused plant, which was
9) Delta Inc. is evaluating a new product. The production line for the new product would be set up in an unused plant, which was purchased one year ago at $300,000. The machinery will cost $240000. The company's inventories would have to be increased by $24000 to handle the new line. The machinery is in Class 43 with a depreciation rate of 30%. The project is expected to last 3 years with estimated EBITDA of $180000 in each year. The machinery has an expected salvage value of $20000 at the end of three years. The company's tax rate is 30% and its weighted average cost of capital is 10%. Assuming that the inventories could be restored to the current level at the end of three years, what is the sum of the net working capital and salvage cash flows in the terminal year? (In other words, terminal cash flows not including operating cash flows and the PV of depreciation tax shields.) Round to the nearest dollar. For example, if your answer if 98765.4321, enter 98765 without the dollar sign.
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