Question: Mathews Mining Company is looking at a project that has
Mathews Mining Company is looking at a project that has the following forecasted sales: first-year sales are 6,800 units and will grow at 15% over the next four years (a five-year project). The price of the product will start at $124 per unit and increase each year at 5%. The production costs are expected to be 62% of the current year’s sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $1,400,000. It will be depreciated using MACRS and has a seven-year MACRS life classification. Fixed costs will be $50,000 per year. Mathews Mining has a tax rate of 30%.What is the operating cash flow for this project over these five years?
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