Estimate the sales price of product

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You are evaluating a product for your company. You estimate the sales price of product to be $230 per unit and sales volume to be 11,300 units in year 1; 26,300 units in year 2; and 6,300 units in year 3. The project has a 3 year life. Variable costs amount to $155 per unit and fixed costs are $213,000 per year. The project requires an initial investment of $363,000 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 $53,000. NWC requirements at the beginning of each year will be approximately 14% of the projected sales during the coming year. The tax rate is 35% and the required return on the project is 9%. What will the year 2 cash flows for this project be?

Reference no: EM13914443

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