Your company is considering a project to produce electric scooters. You've spent $10,000 already on a...

 

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Your company is considering a project to produce electric scooters. You've spent $10,000 already on a market research study that projects the following unit sales: A 1 Year 2 Units B с DE 2 0 1 3 0 1,700 1,870 2,057 After 3 years, the market will be saturated and you will shut down production. Each scooter is expectd to sell for $360 and will incur variable costs of $252 for labor and materials. In addition, you'll incur fixed costs of $122,400 every year. You will need a new machine to produce the scooters. If you buy the machine now (year 0), it will start producing scooters next year (year 1). The machine costs $61,000 to purchase. The machine can be depreciated straight-line to zero over 5 years and can probably be sold for $30,500 after 3 years. Your company has a weighted average cost of capital of 17% and a marginal tax rate of 21%. What is the cash flow from salvage value of the machine in year 3? Your company is considering a project to produce electric scooters. You've spent $10,000 already on a market research study that projects the following unit sales: A 1 Year 2 Units B с DE 2 0 1 3 0 1,700 1,870 2,057 After 3 years, the market will be saturated and you will shut down production. Each scooter is expectd to sell for $360 and will incur variable costs of $252 for labor and materials. In addition, you'll incur fixed costs of $122,400 every year. You will need a new machine to produce the scooters. If you buy the machine now (year 0), it will start producing scooters next year (year 1). The machine costs $61,000 to purchase. The machine can be depreciated straight-line to zero over 5 years and can probably be sold for $30,500 after 3 years. Your company has a weighted average cost of capital of 17% and a marginal tax rate of 21%. What is the cash flow from salvage value of the machine in year 3?

Answer rating: 100% (QA)

To calculate the cash flow from the salvage value of the machine in year 3 we need to consider the d... View the full answer