Your company is investigating the opportunity to produce MP3 players. The equipment required for the project initially costs $1,800,000 and will be depreciated on a straight line to $400,000 (not to zero) over the 4 year life of the project. The project manager actually believes that the equipment could be salvaged for $200,000 at the end of the life of the project. The firm's marginal tax rate is 20% but the average tax rate is 27%. The marketing department and production operations department have estimated the following:

Forecast Sales per Year 120,000 units

Forecast Price per Unit $43

Forecast Variable Cost per Unit $29

Forecast Fixed Costs per Year $510,000

Part A: What is the after-tax salvage value of the equipment?

$400,000

$200,000

$261,000

$240,000

$219,000

Part B: What is the Operating Cash Flow (OCF) per year?

$496,000

$936,000

$40,000

$1,006,000

$1,516,000

Part C: Assume the company sells 140,001 units instead of 140,000. What is the marginal profit of selling that extra unit?

$14

$13

$43

$1,680,000

$29

Part D: The project requires the company to immediately increase inventory by $130,000, and accounts payable will also immediately increase by $90,000. All investments in net working capital will be reversed at the end of the life of the project. What is the initial investment in Net Working Capital?

$130,000

$40,000

$90,000

-$50,000

-$30,000