A project will produce sales of 2,400 units a year for 4 years. The project requires the immediate purchase of equipment at a cost of $100,000. The equipment will be depreciated to a book value of $20,000 (not to zero) on a straight line basis. The equipment will be salvaged at the end of the project creating a $40,000 before-tax cash flow. It costs $18 in labor and materials to produce each unit, and the machinery requires $1,500 each year in maintenance. There are no other costs associated with production. Each unit has an anticipated sales price of $70. If the project is taken, Accounts Payable will immediately increase by $11,000 and Inventory will increase by $50,000.

Part A: What is the after-tax salvage value of the equipment given a marginal tax rate of 25%?

$25,000

$35,000

$20,000

$45,000

$40,000

Part B: What is the Operating Cash Flow (OCF) per year?

$92,475

$97,475

$39,000

$98,975

$95,975

Part C: What is the firm's marginal revenue?

$51

$18

$124,800

$52

$70

Part D: What is the initial investment in Net Working Capital?

-$50,000

$11,000

-$49,000

$39,000

$29,000