Question
You are considering a new product launch. The project will cost $1,195,000, have a four-year life, and have no salvage value; depreciation is straight-line to
You are considering a new product launch. The project will cost $1,195,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 210 units per year; price per unit will be $17,500, variable cost per unit will be $10.600, and fixed costs will be $560,000 per year. The required return on the project is 12 percent. Taxes are 21 percent. You think the unit sales, variable cost, and fixed cost projections given here are probably accurate within +/- 10 percent. What is the annual worst- case Operating Cash Flow (OCF) of this project?
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