Home / Questions / Ivebeen working on this forever Ithink the problem is on the depriciation , do I use 33.3
Ivebeen working on this forever
Ithink the problem is on the depriciation , do I use 33.33 % on year1 and 3?
Pleasehelp I cant figure out year 1 and 3
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You are evaluating a project for The Ultimate recreational tennisracket, guaranteed to correct that wimpy backhand. You estimate thesales price of The Ultimate to be $360 per unit and sales volume tobe 1,000 units in year 1; 1,250 units in year 2; and 1,325 units inyear 3. The project has a 3-year life. Variable costs amount to$205 per unit and fixed costs are $100,000 per year. The projectrequires an initial investment of $153,000 in assets, which will bedepreciated straight-line to zero over the 3-year project life. Theactual market value of these assets at the end of year 3 isexpected to be $31,000. NWC requirements at the beginning of eachyear will be approximately 20 percent of the projected sales duringthe coming year. The tax rate is 39 percent and the required returnon the project is 12 percent. (Use ) |
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What will the cash flows for this project be? (Negative amounts should be indicatedby a minus sign. Do not round intermediate calculations and roundyour answers to 2 decimal places.) |
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Year |
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1 |
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2 |
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3 |
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Total cash flow |
$ |
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$ |
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$ |
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Show transcribed image textIve been working on this forever I think the problem is on the depriciation , do I use 33.33 % on year 1 and 3? Please help I cant figure out year 1 and 3 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 $360 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 $205 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $153,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $31,000. 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 39 percent and the required return on the project is 12 percent. (Use SL depreciation table) What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.)
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