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need ASAP Question 19 (10 points) A firm is considering purchasing new capital equipment at a cost of $300,000 that would have a 12 year
need ASAP
Question 19 (10 points) A firm is considering purchasing new capital equipment at a cost of $300,000 that would have a 12 year useful life to produce a product that will produce a contribution margin of $60 per unit. After 12 years it would have a salvage value of 10% of its original cost. This initiative would require an injection of working capital of $120,000 to finance Inventory and receivables. Units of the final product produced and sold would be 4,000 units in the first year, 7,000 units in the second year, 10,000 units in the third year, and 12,000 units in each of yeas 4 to 12. To enter the market, it is expected that advertising will be $210,000 in each of the first 2 years, $150,000 in the 3rd year, and $120,000 in each of years 4 to 12. Fixed costs per year - including the straight-line depreciation associated with this equipment - would total $382,500. What the annual contribution margin in (note enter negative values in parenthesis - eg. (1000) for negative $1,000 1. Year 1 2. Year 3 3. Years 4-12 What is the operating cash flow in 4. Year 1 5. Year 3 Assuming a cost of capital of 15% - round your answer to the nearest $1,000 (e.g. $17,400 would be 17000, $17,502 would be 18000) 6. What is the present value of the initial investment in working capital? 7. What is the present value of the salvage value of the capital equipment? 8. What is the present value of the in the recovery, if any, of working capital invested? 9. What is the present value of the cash flows in years 4 to 12 assuming in nominal dollars the annual cash flow is $240,000 Step by Step Solution
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