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ABC Corp is considering a project to create new widgets. The project will last for 7 years They plan to sell 10,000 widgets in
ABC Corp is considering a project to create new widgets. The project will last for 7 years They plan to sell 10,000 widgets in year one and the number of widgets will increase by 3% each year. They will sell the widgets for $10 each and the cost to produce the widgets will be $4 per unit. Fixed costs are expected to be $40,000. The project will require an initial capital investment of $100,000 which will be depreciated using a 5 year MACRS schedule(See Table 6.3 in the book). In year 7, the equipment can be salvaged for $10,000. Net Working Capital will be 5% of the next years projected sales. The tax rate is 21% and the Discount rate is 12%. What is the Operating Cash Flow in each year? O01 2 3 4 5 6 7 +A $ $ $ $ (8,058.79) 3,517.08 11,092.09 12,645.16 18,795.24 24,993.34 $ $ $ 01 2 $ +A $ 3 $ 4 5 6 7 $ $ $ $ 18,800.00 20,221.21 21,685.08 23,192.89 24,745.96 26,345.64 27,993.34 01 2 $ $ 3 $ 4 5 6 7 $ $ $ $ 20,000.00 23,941.21 22,717.08 22,612.09 24,165.16 24,555.24 24,993.34 01 2 3 $ $ $ st 4 5 6 7 $ $ $ $ 20,000.00 22,519.21 19,830.42 18,216.83 18,216.04 17,005.65 15,795.26
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