You Are Evaluating a Project for Your Company

question 119

Multiple Choice

You are evaluating a project for your company. You estimate the sales price to be $25 per unit and sales volume to be 4,000 units in year 1; 7,000 units in year 2; and 1,000 units in year 3. The project has a three-year life. Variable costs amount to $10 per unit and fixed costs are $50,000 per year. The project requires an initial investment of $10,000 in assets that 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 $1,000. 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 10 percent. What change in NWC occurs at the end of year 1?

• A)$1,750
• B)$7,500
• C)$11,550
• D)$17,500

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Definitions:

On-time Rates

The percentage or proportion of occurrences that happen within a predetermined time frame, often used in the context of transportation or delivery.

Scheduled Deliveries

Scheduled deliveries refer to the planned transportation of goods or services to a specific location at a predetermined time, often used in logistics and supply chain management to ensure timely distributions.

On-time Rates

The percentage or proportion of events occurring at or within their scheduled time, often used in the context of transportation and deliveries.

Scheduled Deliveries

Prearranged plans for goods or services to be delivered at specific times or intervals, often used to optimize supply chain and logistics.