What is the yearly change in net working capital

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Reference no: EM133633585

Question: NYX company is about to create new widgets. The project will last for 7 years. The company plans to sell 10,000 widgets in year one, and the number of widgets will increase by 3% each year. The company will sell the widgets for $10 each, and the cost to produce the widgets will be $4 per unit. Fixed costs are expected to be $40,000. The project will require an initial capital investment of $100,000 which will be depreciated using a 5-year MACRS schedule (See Table 6.3 below). In year 7, the equipment can be salvaged for $10,000. Net Working Capital will be 5% of the next years projected sales. The tax rate is 21% and the Discount rate is 12%.

A. What is the yearly Change in Net Working Capital?

B. What is the Operating Cash Flow in each year?

C. What are the cash flows from the purchase or sale of the equipment in each year?

D. What is the operating cash flow sensitivity to units sold in year 1?

Reference no: EM133633585

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