Net Income Calculation

IBM is considering a new expansion project and the finance staff has received information summarized

The project require IBM to purchase $$900,000$ of equipment in $2013(t=0).$

Account Receivables will increase by $$175,000$ and accounts payable will rise by $$75,000.$

The project will last for four years. The company forecasts that they will sell $2,685,000$ units in $2014,2,600,$

units in $2015,2,525,000$ units in $2016,$ and $2,450,000$ units in $2017.$ Each unit will sell for $$2.$

The fixed cost of producing the product is $$2$ million each year.

The variable cost of producing each unit will rise from $$1\mathrm{.}018,1\mathrm{.}078,1\mathrm{.}046$ and $$1\mathrm{.}221$ from $2013$ to $2017$

respectively.

The equipment will be depreciated under the MACRS system using the applicable rates of $33\%,45\%,15\%,$ and

$7\%$ respectively

When the project is completed in $2017(t=4),$ the company expects that it will be able to salvage the equipment

for $$50,000,$ and it expects that it will fully recover the NWC$.$

The estimated tax rate is $40\%.$

Based on the perceived risk, the project's Weighted Average Cost of Capital $($WACC$)$ is estimated to be $10\%.$

Calculate the Net Incomes of the project from years $1$ to $4$