CHALLENGE Clyne Industries wants to market its new Slammin Jammin Basketball Goal Set. To bring this product to the market will require the purchase of equipment costing $$650,000.$ Shipping and installation expenses associated with the equipment are estimated to be $$50,000.$ In addition, Clyne will incur incremental employee training and recruiting expenses of $$100,000,$ all of which will be incurred at time $0.$ Additional net working capital investments of $$50,000$ will be required at time $0,$$$25,000$ in year $1,$ and $$10,000$ in year $2.$ Revenues are expected to be $$250,000$ in year $1$ and grow at a rate of $$25,000$ per year through year $5,$ then decline by $$25,000$ per year until the project is terminated at the end of year $10.$ Annual operating expenses are expected to be $$80,000$ in year $1$ and to grow at a rate of $$10,000$ per year until the end of the project life. Depreciation will be under MACRS for a seven$-$year class asset. The salvage value of the equipment at the end of $10$ years is expected to be $$50,000.$ The marginal, ordinary tax rate is $40$ percent and the capital gains tax rate is $30$ percent. $($Hint: See Appendix $9$A for information on MACRS depreciation.$)$ Compute the expected net cash flow for year $10,$ the last year in the life of the project.

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Answer:

$$148,000$

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