EXS currently has one product, high$-$priced pens. EXS Inc. has decided to sell a new. line of medium$-$priced pens. Sales for the new line of pens are estimated at $$100$ a year. Variable costs are $70\%$ of sales. The project is expected to last $10$ years. In addition to the production variable costs, the fixed costs each year will be $$10.$ The company has spent $$10$ in research and a marketing study that determined the company will lose $$10$ in sales a year of its existing high$-$priced pens. The production variable cost of the existing high$-$priced stoves is $$5$ a year.

The plant and equipment required for producing the new line of pens costs $$300$ and will be depreciated down to zero over $30$ years using straight$-$line depreciation. It is expected that the plant and equipment can be sold $($market or scrap value$)$ for $$210$ at the end of $10$ years. The new pens will also require today an increase in net working capital of $$14$ that will be returned at the end of the project.

The tax rate is $20$ percent and the cost of capital is $14\%.$

What is the initial outlay $(IO)$ at time $=0$ for his project?

$$ A $2.$ What is the annual Earnings before Interests, and Taxes $($EBIT$)$ in year $1$ for this project?

A $3.$ What is the operating cash flow $($OCF$)$ in year $1$ for this project?

A $4.$ What is the remaining book value for the plant at equipment at the end of the project?

A

$5.$ What is the tax effect from selling the plant and

equipment at the end of year $10.$ If the tax effect is negative, then enter a negative