Determine the annual cash inflows
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The List Company is considering producing a new product that has an estimated useful life of seven years. The product would require equipment costing $523,000. The equipment has an seven year useful life and estimated salvage value of 0. The equipment is considered a five year class property of MACRS. The firm's marginal tax rate is 35%. Sales are expected to be 20,000 units for the first year and increases by 5% per year for the remaining years. The selling price of the product would be $55 per unit and variable cost per unit is estimated to be $30 and total fixed cost excluding depreciation are estimated to be $420,000 per year and are expected to increased by 3% per year. The firm's cost of capital and hurdle rate is 9.6%
Required:
Determine the annual cash inflows
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The expert determines the annual cash inflows.
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