Q#8 NPV. Mathews Mining Company is looking at a project that has the following forecastedsales: first-year sales are 6,400 units, and sales will grow at 15% over the next four years(a five-yearproject). The price of the product will start at $129.00 per unit and will increase each year at 4%. The production costs are expected to be 60% of the currentyear'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 usingMACRS, and has aseven-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 fiveyears? Find the NPV of the project for Mathews Mining if the manufacturing equipment can be sold for $70,000 at the end of thefive-year project and the cost of capital for this project is 12%.

What is the operating cash flow for this project in year1?

Year 3-Year 5-Year 7-Year 10-Year

1 33.33% 20.00% 14.29% 10.00%

2 44.45% 32.00% 24.49% 18.00%

3 14.81% 19.20% 17.49% 14.40%

4 7.41% 11.52% 12.49% 11.52%

5 11.52% 8.93% 9.22%

6 5.76% 8.93% 7.37%

7 8.93% 6.55%

8 4.45% 6.55%

9 6.55%

10 6.55%

11 3.28%