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You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate

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You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $300 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a three-year life. Variable costs amount to $200 per unit and fixed costs are $50,000 per year. The project requires an initial investment of $150,000 in assets that will be depreciated straight-line to zero over the three year project life. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 12 percent of the projected sales during the coming year. The tax rate is 32 percent and the required return on the project is 10 percent. What will the free cash flow for this project be in year 2? For simplicity, annual depreciation is equal to the initial investment divided by the project life. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Enter numbers only and do not use a comma, for example, enter 1000.01 for 1.000.01)

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