Compute a schedule of operating cash flows for BioComs new product.

Cost of new plant and equipment

$24,000,000

Designs and prototypes

$450,000

Estimated salvage value of technology and equipment, end of year 5

$ 2,400,000

First-year sales forecast

$16,500,000

Projected annual rate of sales increases

6%

Cost of goods sold

40% of sales

Selling, general, and administrative expenses

5% of sales

Annual fixed cost

$600,000

Operating cash flow from current desk sales

$1,650,000

Economic life of the project

5 years

Initial change in net working capital

$480,000

Depreciation

5-year MACRS

Tax rate

34%

Discount rate = cost of capital

9%

QUESTIONS