Mathews Mining Company is looking at a project that has the following forecasted sales: first-year sales are

6,800

units, and sales will grow at

15%

over the next four years (a five-year project). The price of the product will start at

$124

per unit and will increase each year at

5%.

The production costs are expected to be

62%

of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of

$1,400,000.

It will be depreciated using MACRS,

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, and has a seven-year MACRS life classification. Fixed costs will be

$50,000

per year. Mathews Mining has a tax rate of

30%.

What is the operating cash flow for this project over these five years?

Part 1

What is the operating cash flow for this project in year 1?