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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 is the operating cash flow for the project in year 2?
Intellectual Asset
Knowledge, information, or a creative expression that has value to an organization or individual, often protected by intellectual property rights.
Knowledge
The information, understanding, and skills gained through experience or education; the theoretical or practical understanding of a subject.
Wisdom
Wisdom is the ability to use knowledge and experience with insight and judgement to make well-informed decisions.
Viscous
Describes a fluid's resistance to flow; fluids with higher viscosity flow more slowly, as in the case of honey or oil.
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