Question: The project will require $750,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the
The project will require $750,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected increase in sales for the following year. Total fixed assets are $4,100,000 per year. Variable costs will be $215, and units will sell for $335 each. The company will need to purchase equipment for $15,000,000 which will be depreciated as a seven-year MACRS property. In five years, the equipment can be sold for $3,500,000. The company is in the 21 percent tax bracket and has a 14 percent required return on its projects. The company will use land that was purchased for $1,800,000 three years ago. The land could be sold today for $2,400,000 and it is believed that it will be sold in five years for $2,700,000.
How would I find the after-tax salvage value and the NWC balance and change in this question?
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