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You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $35. The production cost of each
You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of \$35. The production cost of each heater is $22. You are expecting to sell 7400 units per year. This project has an economic life of 8 years. The project requires an investment of $520000in plants and equipment. This equipment wit be depreciated to zero salvage value based on 7-year MACRS schedule. The depreciation rates from year 1 to 8 are 14.29%,24.49%,17.49%,12.49%,8.93%,8.92%,8.93%, and 4.46 percent, rospectively. The company will sell its old equipment for $90000. The old machine is fully depreciated. The required rate of return for the project is 11 percont, the working capital requiremont is 15 porcent of the next year's sales revenue. The marginal corporate tax rate is 21 percont. At the termination of the project. the plant and equipment will be sold for an estimated value of $36000. Based on these assumpsions, estimate the working capital requirements for the project. What is the initial cash flow required for working capital? 36000 25900 .80868 38850
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