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A company is considering launching a new product line featuring protein bars coated with deluxe chocolate flavors. The company has spent $ 7 5 ,

A company is considering launching a new product line featuring protein bars coated with deluxe chocolate flavors. The company has spent $75,000 developing a new protein bar line as a part of the companys product diversification plan. It also spent another $40,000 for market research on flavors to produce.Based on market research, the company expects in the first year to sell 1,200,000 protein bars at a price of $2.45 each, with an expected annual growth of 3% in sales volume for years two through six.
The variable costs per unit are $0.80, while the annual fixed costs are $30,000. The company estimates that the net working capital will be 8% of next years sales. Assume all net working capital will be recovered at the end of the project.
To expand production capacity for this new product line, the company is required to have an initial investment of $700,000 in factory equipment. The equipment will be depreciated straight-line for six years and is expected to have a $125,000 salvage value. Based on the operations departments best estimate, the company can sell the factory equipment for $180,000 at the end of year six.
The companys Tax Rate is 20%, and its cost of capital is 7.6%. However, the finance team suggests that the appropriate project discount rate should be higher as the company has no prior experience in making protein bars. The Market Risk Premium is 7%, and the risk-free rate is 4%. The companys Beta is 1.20, while the project is deemed to be three times riskier.
If the acquired factory equipment is disposed at the end of year 3 at $500,000, what will be the after-tax cash flows related to this disposal (rounded to the nearest dollar)?

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