Company FINC is investigating the feasibility of introducing a new product to the market. Based on the market research, it forecasts unit sales as follows:

Year	1	2	3	4	5	6	7	8
Unit Sales	3,000	5,000	6,000	6,500	6,000	5,000	4,000	3,000

The new product will be priced to sell at $120 per unit to start, when the competition catches up after three years, FINC anticipates that the price will drop to $110.

The variable cost per unit is $60, and the total fixed costs are $25,000 per year. The new product will require $20,000 in net operating working capital at the start, which will be recovered at the end of the project.

This project will cost about $800,000 to buy the equipment necessary to begin production. This $800,000 will be 100% depreciated over the life of this project (8 years) as seven-year MARCS property. The depreciation schedule is shown as follows:

Year	MARCS Depreciation Schedule (% of the equipments initial cost)
1	14.29%
2	24.49
3	17.49
4	12.49
5	8.93
6	8.92
7	8.93
8	4.46

The equipment will be worth 20% of its initial cost in 8 years, or the salvage value is $160,000 (=0.20 x $800,000). The tax rate is 21%, and the required return (WACC) on this project is 15%.

Table 4. Calculate Terminal Cash Flows at Year 8

Salvage Value of Equipment
Tax on Salvage Value [Tax rate x (salvage value book value)]
After-Tax salvage value
DNOWC Recovered