Question: Cougar Communications is considering a project with an initial fixed asset cost of $400,000 which will be depreciated straight-line to a zero book value over
Cougar Communications is considering a project with an initial fixed asset cost of $400,000 which will be depreciated straight-line to a zero book value over the 5-year life of the project. At the end of the project the equipment will be sold for an estimated $60,000. The sales price of the product is to be $210 and the incremental sales to be 2000 units per year. Variable costs amount to $80 per unit and fixed costs are $100,000 per year. The tax rate is 35 percent. The project will require $30,000 of net working capital which will be recouped when the project ends. The firm requires a 16 percent rate of return a. What is the operating cash flow (OCF)2 (You would not need to show all 5 years. One year would be sufficient) b. Whions is the cash flow from asset (CFFA)? c. What is the project NPV? Should the project be implemented? Focus
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