Reference no: EM133290520

Case: Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles? (who wants to ride on a cloudy day? anyway?) The proposed project has the following? features;

?• The firm just spent? $300,000 for a marketing study to determine consumer demand? (@ t=0).

?• Aero Motorcycles purchased the land the factory will be built on 5 years ago for? $2,000,000 and owns it outright? (that is, it does not have a? mortgage). The land has a current market value of? $2,600,000.

?• The project has an initial cost of? $20,000,000 (excluding? land, hint: the land is not subject to? depreciation).

?• If the project is? undertaken, at t? = 0 the company will need to increase its inventories by? $3,500,000, accounts receivable by?$1,500,000, and its accounts payable by? $2,000,000. This net operating working capital will be recovered at the end of the? project'slife? (t =? 10).

?• If the project is? undertaken, the company will realize an additional?$8,000,000 in sales over each of the next ten years.? (i.e. sales in each year are? $8,000,000)

?• The company's operating cost? (not including? depreciation) will equal?50% of sales.

?• The company's tax rate is 35 percent.

?• Use a? 10-year straight-line depreciation schedule.

?• At t? = 10, the project is expected to cease being economically viable and the factory? (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase? price).

?• The project's WACC? = 10 percent

?• Assume the firm is profitable and able to use any tax credits? (i.e.negative? taxes).

What is the total cash flow at? t=10? Round to nearest whole dollar value.