Sales: $$713,500$

Costs: $$497,500$

Depriciation:$$87,400$

EBIT:$$128,800$

Taxes$(21\%)$: $27,048$

Net Income: $101,752$

OCF: $$189,152$

Exercise II

Based on the following information for Project X$,$ should we undertake the venture? Calculate the NPV assuming a $28$ percent required return and a $21$ percent tax rate.

Project $x$ involves a new type of graphite composite in$-$line skate wheel. We think we can sell $6,000$ units per year at a price of $1,000$ each. Variable costs will run about $$400$ per unit, and the product should have a four$-$year life.

Fixed costs for the project will run $$450,000$ per year. Further, we will need to invest a total of $$1,250,000$ in manufacturing equipment. The depreciation amount is $$312,500$ each year. We will have to invest $$1,150,000$ in net working capital at the start.