Shark Bait Corporation is thinking of buying some new shark attractant manufacturing equipment that will last 3 years. Shark Bait thinks it can sell 56,000 cans of shark attractant each year at a price of $5.50 per can if it buys the new equipment (Revenue). It costs $3.50 per can to make the attractant and the project has a projected 3 year life (Expense). Other expenses include rent on the production facility of $11,000 per year (Expense).

The new manufacturing equipment will cost $98,000 and be depreciated to zero over the 3 year life of the project. The equipment will have no salvage value after 3 years. The project will require an additional net working capital of $18,000 at the time the equipment is purchased. The tax rate is 37%

Calculate the Net Investment

Asset Cost ________________

+ Delivery and Installation ________________

= Total installed cost ________________

- Proceeds from sale of old asset ________________

+ Tax on sale of old asset ________________

+ Net working capital ________________

= Net Investment ________________

Calculate Net Cash Flow

	Year 0	Year 1	Year 2	Year 3
Rev
- Oper Costs
- Dep
= OEBT
- Taxes
= OEAT
+ Dep
- NWC
+ After Tax Salvage
= NCF