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The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of $4,000,000 and will
The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of $4,000,000 and will be depreciated straight line to zero over ten years. Projected sales in annual units for the next five years are 320 per year. The sales price is $27,000 per car, variable costs are $17,000 per car, and fixed costs are $1,300,000 annually. The tax rate is 30%. Net working capital is $500,000 in year 0 and is maintained at that level each year. Midway through the project is terminated. The equipment will be sold for salvage for $3,000,000 at the end of year five. NWC is sold at 100% of book value. The firm is liable for any tax on capital gain/loss. a) What is the TV at the end of year 5 from the liquidation of all the assets? b) What is the FCF at year 0
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