Question: EE Ltd is considering a new product line. Projected values for the second year of operation are: Revenue: $70,000 Variable costs: 35% of revenue Capital

EE Ltd is considering a new product line. Projected values for the second year of operation are: Revenue: $70,000 Variable costs: 35% of revenue Capital Cost Allowance: $7,000 Other fixed costs: $11,000 Change in net working capital: $0 Additional capital investment: $4,000 The firm pays 30% corporate taxes and expects that 15% of sales would be from cannibalization of the firms existing products. What is the expected incremental net cash flow for year 2 of this project?

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