ABC Corp is considering a project to create new widgets. The project will last for 7...

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ABC Corp is considering a project to create new widgets. The project will last for 7 years They plan to sell 10,000 widgets in year one and the number of widgets will increase by 3% each year. They will sell the widgets for $10 each and the cost to produce the widgets will be $4 per unit. Fixed costs are expected to be $40,000. The project will require an initial capital investment of $100,000 which will be depreciated using a 5 year MACRS schedule(See Table 6.3 in the book). In year 7, the equipment can be salvaged for $10,000. Net Working Capital will be 5% of the next years projected sales. The tax rate is 21% and the Discount rate is 12%. What is the yearly Change in Net Working Capital? 0 1 2 $ $ $ 3 $ 4 5 6 7 $ $ $ $ (5,000.00) (150.00) (154.50) (159.14) (163.91) (168.83) (173.89) 5,970.26 1 2 3 4 5 6 7 $(5,000) $5,000 0 1 2 3 4 5 6 7 $ (5,000.00) (150.00) $ $ $ $ $ $ (154.50) (159.14) (163.91) (168.83) (173.89) 0 0 1 2 3 4 5 6 7 $ $ $ $ $ $ $ (5,000.00) (150.00) (154.50) (159.14) (163.91) (168.83) 5,796.37 ABC Corp is considering a project to create new widgets. The project will last for 7 years They plan to sell 10,000 widgets in year one and the number of widgets will increase by 3% each year. They will sell the widgets for $10 each and the cost to produce the widgets will be $4 per unit. Fixed costs are expected to be $40,000. The project will require an initial capital investment of $100,000 which will be depreciated using a 5 year MACRS schedule(See Table 6.3 in the book). In year 7, the equipment can be salvaged for $10,000. Net Working Capital will be 5% of the next years projected sales. The tax rate is 21% and the Discount rate is 12%. What is the yearly Change in Net Working Capital? 0 1 2 $ $ $ 3 $ 4 5 6 7 $ $ $ $ (5,000.00) (150.00) (154.50) (159.14) (163.91) (168.83) (173.89) 5,970.26 1 2 3 4 5 6 7 $(5,000) $5,000 0 1 2 3 4 5 6 7 $ (5,000.00) (150.00) $ $ $ $ $ $ (154.50) (159.14) (163.91) (168.83) (173.89) 0 0 1 2 3 4 5 6 7 $ $ $ $ $ $ $ (5,000.00) (150.00) (154.50) (159.14) (163.91) (168.83) 5,796.37