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Linksys is considering the development of a wireless home networking appliance, called HomeNet. Sales forecast for HomeNet is 50,000 units per year. Linksys expects the
Linksys is considering the development of a wireless home networking appliance, called HomeNet. |
Sales forecast for HomeNet is 50,000 units per year. |
Linksys expects the product will have a four-year life and an expected wholesale price of $250. |
Actual production will be outsourced at a cost of $110 per unit. |
Linksys will rent the lab space but will need to purchase $7.5 million of new equipment. The lab will be operational at the end of one year. |
Linksys expects to spend $2.8 million per year on rental costs for the lab space. |
The lab equipment will be depreciated using the straight-line method over a 5-year life. |
Linksys' marginal corporate tax rate is 40%. |
The cost of capital for this project is 12.00% |
How much is the "Year 5" incremental free cashflow for this project (in millions)? |
Enter your answer in the following format: + or - 1.23; Hint #1: Answer is between 0.5 and 0.71 |
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