Question
Sleep Comfort Corp. is considering a new product: the Ejector Bed. The Ejector Bed allows either person (left or right) to eject the other person
Sleep Comfort Corp. is considering a new product: the Ejector Bed. The Ejector Bed allows either person (left or right) to eject the other person off of the bed at the touch of a button. The production equipment and facilities will cost $500 million. The project will last two years by which time the equipment and facilities will be sold for $150 million. Earnings before interest, taxes, and depreciation are forecast to be $400 million in both years. The project will require an increase in net working capital of $25 million, which will be liquidated at the end of year two. The company's cost of capital is 9% and the marginal tax rate is 35%. Answer the following questions.
What are the operating cash flows in Year 1? (Express your answer in millions of dollars rounded to the nearest million.)
What are the terminal cash flows? (Express your answer in millions of dollars rounded to the nearest million.)
What is the NPV of the project? (Express your answer in millions of dollars rounded to the nearest million.)
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