Question
You are examining the desirability of selling widgets. To conduct the analysis, youve estimated that you will sell 2 million units and will sell the
You are examining the desirability of selling widgets. To conduct the analysis, youve estimated that you will sell 2 million units and will sell the units for $89 each for the next five years. The variable costs for producing this product is estimated to be $50 per unit. Fixed costs will be $5 million per year. The equipment used to produce the widgets will cost $50 million and will be depreciated using the MACRS depreciation schedule for a five-year useful life. In year 5, the equipment will be sold for 25% of its original cost. The tax rate is 21%. Construct a proforma income statement to find the net income and operating cash flow for each of the five years of the project.
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