What is the operating cash flow for the project in year 2

Reference no: EM13281848

You are evaluating a project for your company. You estimate the sales price to be $200 per unit and sales volume to be 3000 units in year 1; 4000 units in year 2; and 2500 units in year 3. The project has a three-year life. Variable costs amount to $50 per unit and fixed costs are $150,000 per year. The project requires an initial investment of $200,000 in assets which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $30,000. NWC requirements at the beginning of each year will be approximately 10 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 12 percent. What is the operating cash flow for the project in year 2?

Reference no: EM13281848

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