Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22,741 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $293. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%.
Year |
1 |
2 |
3 |
4 |
Sales |
$11,369 |
$12,774 |
$13,543 |
$10,467 |
Costs |
2,154 |
2,931 |
3,410 |
1,465 |
NWC Requirements |
337 |
354 |
233 |
0 |
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