Question: This project will require a one-time initial investment of $50,000 in net working capital, and working-capital investment will be recovered when the project is shut down. Finally, assume that the firm's marginal tax rate is 34 percent.
a. What is the initial outlay associated with the project?
b. What are the annual free cash flows associated with the project for years 1 through 9 under each sales forecast? What are the expected annual free cash flows for years 1 through 9?
c. What is the terminal cash flow in year 10 (that is, what is the free cash flow in year 10 plus any additional cash flows associated with the termination of the project)?
d. Using the expected free cash flows, what is the project's NPV given a 10 percent required rate of return? What would the project's NPV be if 10,000 skateboards were sold?