Question: Balik Ventures is looking at a project with the following forecasted sales: first-year sales quantity of 20,000 with an annual growth rate of 4% over
Balik Ventures is looking at a project with the following forecasted sales: first-year sales quantity of 20,000 with an annual growth rate of 4% over the next 5 years. The sales price per unit is $35.00 and will grow at 5% per year. The production costs are expected to be 45% of the current year’s sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,200,000. It will be depreciated using MACRS and has a five-year MACRS life classification. Fixed costs are $285,000 per year. The firm has a tax rate of 35%.What is the operating cash flow for this project over these 5 years?
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