Costs of test marketing (already spent): $250,000.

Current market value of proposed factory site (which we own):

$150,000.

Cost of bowling ball machine: $100,000 (depreciated according to ACRS 5-year life). After 5 years the machine is expected to sell for $30,000

Additional investment in inventory: $10,000.

Production (in units) by year during 5-year life of the machine:

5,000, 8,000, 12,000, 10,000, 6,000.

Price during first year is $20; price increases 2% per year thereafter.

Production costs during first year are $10 per unit and increase 10% per year thereafter.

Corporate income tax is 34%

Calculate: Project’s Cash flows

Answer rating: 100% (QA)

Year 1 Cash Flow Sales Revenue 5000 units x 20 each 100000 Production Costs 5000 units x 10 each 500... View the full answer