1. The Motor Works is considering an expansion project with
estimated fixed costs of $127,000, depreciation of $16,900,
variable costs per unit of $41.08, and an estimated sales price of
$79.90 per unit. How many units must the firm sell to break even on
a cash basis?
2.
Fill in the Blanks
A $1,000,000 investment is depreciated using a seven-year MACRS
class life.
It requires $150,000 in additional inventory and will increase
accounts payable by $50,000.
It will generate $400,000 in revenue and $150,000 in cash
expenses annually, and the tax rate is 40%.
What is the incremental cash flow in years 0,
Year 1
Year 7
Year 8?
