Based on the following information for

Project X$,$ should we undertake the venture? To answer, first prepare a pro forma

statement of comprehensive income for each year. Second, calculate the operating

cash flow. Finish the problem by determining total cash flow and then calculating

NPV assuming a $20\%$ required return. Use a $40\%$ tax rate throughout. For help, look

back at our examples in the chapter.

Project X is a new type of audiophile$-$grade stereo amplifier. We think we can sell $500$

units per year at a price of $$10,000$ each. Variable costs per amplifier run about $$5,000$

per unit, and the product should have a four$-$year life. We require a $20\%$ return on new

products such as this one.

Fixed costs for the project run $$610,000$ per year. Further, we need to invest $$1,100,000$

in manufacturing equipment. This equipment belongs to class $8$ for CCA purposes. In

four years, the equipment can be sold for its UCC value. We would have to invest

$$900,000$ in working capital at the start. After that, net working capital requirements

would be $30\%$ of sales.