The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas ). The necessary foundry equipment will cost a total of $ 4,200,000 and will be depreciated using a five-year MACRS life, Projected sales in annual units for the next five years are 310 per year. If the sales price is $ 26, 000per car, variable costs are $16, 000 per car, and fixed costs are $1,300,000 annually, what is the annual operating cash flow if the tax rate is 40%? The equipment is sold for salvage for $500, 000 at the end of year five. What is the after - tax cash flow of the salvage? Net working capital increases by $625,000 at the beginning of the project (year 0) and is reduced back to its original level in the final year. What is the incremental cash flow of the project? Using a discount rate of 13% for the project, determine whether the project should be accepted or rejected according to the NPV decision model.
The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas ). The necessary foundry equipment will cost a total of $ 4,200,000 and will be
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