Question

You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $400 per unit and sales volume to be 1,000 units in year 1; 1,520 units in year 2; and 1,235 units in year 3. The project has a 3-year life. Variable costs amount to $220 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $53,000. Initial net working capital investment is $ 80,000 and NWC will maintain a level equal to 20% of sales each year thereafer. The tax rate is 35 percent and the required return on the project is 11 percent

compute-

calculate the net change in WC in each year of the project life ?

calculate the operating cash flow fot the project in each year of the project life

calculate the net capital spending for the project in each year of the project life

compute the NPV of the project

Answer 1