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Help with 6,7,8 Cheese & Cake Factory is looking at a project with the following forecasted sales: first-year sales quantity of 35,000 with an annual

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Cheese \& Cake Factory is looking at a project with the following forecasted sales: first-year sales quantity of 35,000 with an annual growth rate of 5% over the next 5 years. The sales price per unit is $40 and will grow at 3% per year. The production costs are expected to be 50% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $1,000,000. It will be depreciated using MACRS and has a seven -year MACRS life classification (see attached table). Fixed costs are $300,000 per year. The change in net operating working capital is $10,000 and will be recovered at the end of year 5 . Cheese \& Cake Factory has a tax rate of 40%. At the end of year 5 , the manufacturing equipment can be sold for $150,000 and the cost of capital for this project is 10%. 6. What is the initial cash flow on this project? A. $1,010,000 Inital cash flow = - cost of equiparen- B. $35,000 C. $1,000,000 D. $2,650,000 increase of NWC 7. What are the operating cash flow for years one and two? A. $257,100&$212,150 B. $297,160&$372,190 C. $1,000,000&$10,000 D. $142,900&$244,900 8. What is the termination cash flow (everything except the operational cash flow) at the end of A. $189,240 B. $10,000 C. $223,100 D. $29,240

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