Problem:
You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $410 per unit and sales volume to be 1,230 units in year 1; 1,600 units in year 2; and 1,330 units in year 3. The project has a three-year life. Variable costs amount to $275 per unit and fixed costs are $133,500 per year. The project requires an initial investment of $179,000 in assets, which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $41,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent.
Required:
Question 1: What change in NWC occurs at the end of year 1?
Question 2: What is the operating cash flow for the project in year 2?
Note: Please provide through step by step calculations.