You are evaluating a project for The Ultimate Driver, guaranteed to correct that nasty slice you hit off the tee. You estimate the sales price of The Ultimate to be $599 and sales volume to be 2,000 units in year 1, 2,250 units in year 2, and 2,500 units in year 3. The project has a 3 year life. Variable costs amount to $325 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $255,000 which is depreciated straight-line to zero over the 3 year project life. The actual market value of the initial investment at the end of year 3 is $40,000. Initial net working capital investment is $75,000 and NWC will be maintained a level equal to 20% of sales each year thereafter. The firm has outstanding 5% annual coupon bonds with 7 years to maturity selling for 89:23. The firm’s common stock currently sells for $61 per share and recently paid a $3 dividend. The firm’s total debt ratio is 0.33 and the tax rate is 30%. 25. What is EBIT for the project in the first year? 26. Given the $75,000 initial investment in NWC, what change occurs for NWC during year 1? 27. What is the operating cash flow for the project in year 2? 28. What is the effect of the $35,000 salvage value on year 3 cash flows? 29. What is the total cash flow for the project in year 3?
EBIT of project the first year?
operating cash flows for year 2?
effect of salvage value of $35000 in year 3?
total cash flow for year 3?
please show steps and formulas, im using a ba ii plus financial calculator