Margarite's Enterprises is considering a new project. The project will require $325,000 for new fixed assets, $160,000 for additional inventory and $35,000 for additional accounts receivable. Short-term debt is expected to increase by $100,000 and long-term debt is expected to increase by $300,000. The project has a 5-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 25% of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $554,000 and costs of $430,000. The tax rate is 35% and the required rate of return is 15%.

What is the initial cost of this project? A. $325,000 B. $420,000 C. $425,000 D. $520,000 E. $620,000

What is the amount of the earnings before interest and taxes for the first year of this project? A. $38,500 B. $59,000 C. $67,000 D. $76,500 E. $159,000

What is the amount of the after-tax cash flow from the sale of the fixed assets at the end of this project? (Round your answer to whole dollars.) A. $28,438 B. $37,918 C. $52,813 D. $60,009 E. $81,250

What is the cash flow recovery from net working capital at the end of this project? A. $95,000 B. $147,812 C. $195,000 D. $247,812 E. $295,000

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