What are the net cash flows for each year of the project

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Reference no: EM131794305

Question: A new line of clothing is expected to result in sales of $5 million in the first year of a project. Production costs will be $65% of sales. Sales are expected to increase at 40% in the second year, and 30% in the third year. The equipment necessary to produce the clothing will cost $4.5 million and will be depreciated using the MACRS 3-year rates. Required NOWC will be equal to 5% of sales. The estimated salvage value of the equipment is $300,000 at the end of 3 years. The company is in the 40% marginal tax bracket. What are the net cash flows for each year of this project? Don't forget to include the cash flow at time zero and the additional non-operating cash flows in the 3rd year.

Reference no: EM131794305

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