What would be the operating cash flows

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Reference no: EM133273603

Question - The management of Maximus Ltd. believes it can sell 65,000 smart doorbell devices per year at $85 per piece. They cost $50 to manufacture (variable cost). Fixed production costs run $60,000 per year. The necessary equipment costs $2,250,000 to buy and would be depreciated at a 20 percent CCA rate. The equipment would have a salvage value of $450,000 after the five-year life of the project. There would a Net Working Capital requirement of $100,000, and this would be recovered at the end of the fifth year. The discount rate is 15 percent, and the tax rate is 35 percent.

a. What would be the value of the initial (i.e. year = 0) Cash Flow for this project?

b. What would be the operating cash flows during years 1 to 4 for this project?

c. What is the PVCCATS? (Remember the 1.5 times rule)

Reference no: EM133273603

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