Manufactures line of inexpensive cell phone cases

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Reference no: EM131884108

Your sister’s company currently manufactures a line of inexpensive cell phone cases. She and her executive team have decided to produce a more upscale line of cases constructed of carbon fiber. This will require purchasing new equipment. You have the following information on this investment project, what are the after-tax cash flows that it is expected to generate? (my answers are in thousands)

Cost of carbon fiber molding machinery: $80,000

Expected life of machinery: 5 years

Expected Salvage Value of machinery after 5 years: $20,000

Depreciation method: straight line

Expected sales of new phone cases: $130,000 per year

Cost of raw material: $70,000 per year

Cost of additional labor: $30,000 per year

Additional Net Working Capital required at the start of the project: $20,000

Tax rate: 35%.

Reference no: EM131884108

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