Question
Mathews Mining Company is looking at a project that has the following forecasted sales: first-year sales are 7000 units, and sales will grow at 15%
Mathews Mining Company is looking at a project that has the following forecasted sales: first-year sales are 7000 units, and sales will grow at 15% over the next four years (a five-year project). The price of the product will start at $ 124.00 per unit and will increase each year at 7%. The production costs are expected to be 60% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $1,600,000. It will be depreciated using MACRS, and has aseven-year MACRS life classification. Fixed costs will be $51,000 per year. Mathews Mining has a tax rate of 30%. What is the operating cash flow for this project over these five years? What is the operating cash flow for this project in year 1?_____________ Round to nearest dollar What is the operating cash flow for this project in year 2? _____________ Round to nearest dollar What is the operating cash flow for this project in year 3? _____________ Round to nearest dollar What is the operating cash flow for this project in year 4? _____________ Round to nearest dollar What is the operating cash flow for this project in year 5? _____________ Round to nearest dollar What is the book value of the manufacturing equipment after five years? _____________ Round to nearest dollar What is the gain (or loss) for the sales of the manufacturing equipment after 5 years? _____________ Round to nearest dollar What is the after-tax cash flow of the manufacturing equipment at disposal? _____________ Round to nearest dollar What is the NPV of the project? _____________ Round to nearest dollar
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