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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 year
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 are the cash flows from the purchase or sale of the equipment in each year
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