Considering expanding one of its production facilities

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Reference no: EM131314021

Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be fully depreciated (straight-line) over its 3 year life. They believe they can salvage $300,000 for the equipment at that time.

Incremental sales are expected to be $10,000,000 annually for the 3 year period with costs (excluding depreciation) of 42%. The company would also have to commit initial working capital to the project of $1,000,000. The company has a 36% tax rate.

Project cash flow for Year 0 is:

Project cash flow for Year 1 is:

Project cash flow for Year 3 is:

Reference no: EM131314021

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