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You are considering a new product launch. The equipment will cost 5 2 0 , 0 0 0 , have a four year life, and

You are considering a new product launch. The equipment will cost 520,000, have a four year life, and have a salvage value of zero. The equipment qualifies for the immediate 100 percent bonus tax depreciation methos. Sales are projected at 200 units per year, price per unit will be 2,000, and cost (excluding depreciation) are estimated as follows: variable cost per unit will be 1,500 and fixed cosy will be 22,500. The firm marginal tax rate is 21% and it uses a 15 percent risk adjusted discount rate to evaluate projects of this type. Based on your experience you think yhat the unit price, the variable cost per unit and the fixed costs are probably accurate estimates to withis plus or minus 10%. What is the worst-case scenario for the first year operating cash flow?

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