You are evaluating a product for your company. You estimate thesales price of product to be $160 per unit and sales volume to be10,600 units in year 1; 25,600 units in year 2; and 5,600 units inyear 3. The project has a 3 year life. Variable costs amount to $85per unit and fixed costs are $206,000 per year. The projectrequires an initial investment of $342,000 in assets which will bedepreciated straight-line to zero over the 3 year project life. Theactual market value of these assets at the end of year 3 isexpected to be $46,000. NWC requirements at the beginning of eachyear will be approximately 16% of the projected sales during thecoming year. The tax rate is 30% and the required return on theproject is 11%. What will the year 2 cash flows for this projectbe?
Multiple Choice
$1,234,000
$1,120,000
$1,600,000
$1,746,000
