Question
UPGD Dimensions is introducing a new product that is expected to have 3 year lives.This product will be costing $9710000 and is expected to generate
UPGD Dimensions is introducing a new product that is expected to have 3 year lives.This product will be costing $9710000 and is expected to generate operating profit of $4750000 per year. According to market research conducted this year at a cost of $60,000, if any working capital is spent in a new project, 50 percent of the working capital could be recoverable at the project's conclusion. This project would also generate $200,000 in annual depreciation. Assume that the company's tax rate is 35%. In addition, beginning in its first year of service (Year 1), this project will generate the following account balances in each of the next three years:
Without the Project With the Project
Cash $55,000 $89,000
Inventory $100,000 $180,000
Accounts Payable $70,000 $120,000
Calculate the project's Free Cash Flows?
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