Boomerang Inc. is considering a new 4-year project. It will require the purchase of a $4.0 million machine with an additional $100,000 for shipping and $200,000 for installation. The machine will be depreciated straight-line to zero over its four-year economic life, after which it will have no salvage value. The project is expected to have sales of 100,000 units per year at a price of $20 per unit. There will be fixed costs of $20,000 per year and variable cost per unit of $6.25 per unit. The company’s marginal tax rate is 35%. Their cost of capital is 10 percent.

What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3?

What Is the NPV?

Answer rating: 100% (QA)

SOLUTION To calculate the projects net cash flows we need to determine the cash inflows and outflows ... View the full answer