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 $400,000 (not to zero) over the 4 year life of the project. The project manager actually believes that the equipment could be salvaged for $200,000 at the end of the life of the project. The firm's marginal tax rate is 20% but the average tax rate is 27%. The marketing department and production operations department have estimated the following:

Forecast Sales per Year	150,000 units
Forecast Price per Unit	$50
Forecast Variable Cost per Unit	$35
Forecast Fixed Costs per Year	$480,000

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

$400,000

$200,000

$235,000

$245,000

$240,000

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

$996,000

$1,956,000

$1,416,000

$1,476,000

$110,000

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

$14

$35

$2,250,000

$50

$15

Part D: The project requires the company to immediately increase inventory by $190,000, and accounts payable will also immediately increase by $80,000. 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?

$80,000

$110,000

$190,000

-$120,000

-$100,000