Question
Mathews Mining Company is looking at a project that has the following forecasted sales: first-year sales are 6,800 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
6,800
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
per unit and will increase each year at
5%.
The production costs are expected to be
62%
of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of
$1,400,000.
It will be depreciated using MACRS,
LOADING...
, and has a seven-year MACRS life classification. Fixed costs will be
$50,000
per year. Mathews Mining has a tax rate of
30%.
What is the operating cash flow for this project over these five years?
Part 1
What is the operating cash flow for this project in year 1?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started