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Problem:

A company is evaluating a proposed 4-year project. The depreciable cost will include the following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for installation. The depreciation life is under the MACRS 3-year class, with a salvage value of $45,000. The inventories will rise by $18,000 and accounts payable will rise by $3,000. In addition, the new sales are estimated to be 150,000 units per year at $2.25 per unit. There is a variable operating cost that is 60% of sales and the company's marginal tax rate is 35%.

Required:

Question: Determine the net operating cash flow for the initial year (Year 0).

Note: Solve the given numerical problem and illustrate step by step calculation.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173440

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