Your company is investigating the opportunity to produce MP3 players. The equipment required for the project initially costs $1,600,000 and will be depreciated on a straight line to $100,000 (not to zero) over the 5 year life of the project. The project manager actually believes that the equipment could be salvaged for $250,000 at the end of the life of the project. The firm's marginal tax rate is 25% but the average tax rate is 27%. The marketing department and production operations department have estimated the following:

Forecast Sales per Year	140,000 units
Forecast Price per Unit	$42
Forecast Variable Cost per Unit	$34
Forecast Fixed Costs per Year	$430,000

Part A: What is the after-tax salvage value of the equipment?

$198,500

$212,500

$226,500

$250,000

$100,000

Part B: What is the Operating Cash Flow (OCF) per year?

$517,500

$592,500

$120,000

$162,500

$1,022,500

Part C: Assume the company sells 140,001 units instead of 140,000. What is the marginal profit of selling that extra unit?

$1,120,000

$7

$8

$42

$34

Part D: The project requires the company to immediately increase inventory by $180,000, and accounts payable will also immediately increase by $60,000. All investments in net working capital will be reversed at the end of the life of the project. What is the initial investment in Net Working Capital?

$180,000

$120,000

-$60,000

-$120,000

$60,000

-$180,000