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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

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 $440 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 3-year life. Variable costs amount to $245 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $177,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $39,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. (Use SL depreciation table)
What will the cash flows for this project be?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 $440 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 3-year life. Variable costs amount to $245 per unit and fixed costs are $100,000 per year. The project
requires an initial investment of $177,000 in assets, which can be depreciated using bonus depreciation. The actual market value of
these assets at the end of year 3 is expected to be $39,000. NWC requirements at the beginning of each year will be approximately
20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11
percent. (Use SL depreciation table)
What will the cash flows for this project be?
Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.
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