Question

 The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds​ (1957 replicas). The necessary foundry equipment will cost a total of ​$3,800,000 and will be depreciated using a​ five-year MACRS​ life, LOADING.... Projected sales in annual units for the next five years are 300 per year. If the sales price is $ 25 ,000 per​ car, variable costs are ​$18,000 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 ​$550,000 at the end of year five. What is the​ after-tax cash flow of the​ salvage? Net working capital increases by ​$550,000 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.

1. what is the annual operaing cash flow of the project for year 1?

2. what is the annual operaing cash flow of the project for year 2?

3. what is the annual operaing cash flow of the project for year 3?

4. what is the annual operaing cash flow of the project for year 4?

5. what is the annual operaing cash flow of the project for year 5?

6. what is the after- tax cash flow of the equipment at disposal?

7. what is the incremental cash flow of the project in year 0?

8. what is the incremental cash flow of the project in year 1?

9. what is the incremental cash flow of the project in year 2?

10. what is the incremental cash flow of the project in year 3?

11. what is the incremental cash flow of the project in year 4?

12. what is the incremental cash flow of the project in year 5?

13. what is the IRR of the project?

Data Table MACRS Fixed Annual Expense Percentages by Recovery Class 10-Year 10.00% 18.00% 14.40% 11.52% 9.22% 7·37% 6.55% 6.55% 6.55% 6.55% 3.28% 5-Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 7-Year 14.29% 24.49% 17.49% 12.49% 8.93% 8.93% 8.93% 4.45% 3-Year 3333% 44.45% 14.81% 7.41% Year 2 7 8 10