Is the table I\'ve completed so far correct? A company is considering a 2-stage

Question

Is the table I've completed so far correct?

A company is considering a 2-stage expansion of its operating capacity. This would involve the purchase today of a machine for $900,000, and the purchase of a second machine 2 years from now for $400,000. Each machine would be straight line depreciated to $0 over a 10-year lifetime. For each machine, depreciation expenses begin the year after purchase (so the machine bought today is depreciated beginning in year 1, etc.).

First year sales due to the expansion are expected to be $1,500,000, and are expected to grow at an annual rate of 5% per year, for the 5 years of the project. Variable costs will equal to 15% of sales, and the tax rate is 30%. Annual fixed operating costs are expected to be $600,000 in the first year, and to grow at 3% per year.

At the end of the project, the company expects to sell the first machine for $510,000, and the second machine for $220,000. Initial net working capital is $75,000, and NWC is expected to equal 8% of sales in each year, and will be fully recovered at the end of the project.

Questions
1. What are projected sales in year 3?
2. What are variable costs in year 3?
3. What is depreciation in year 4?
4. What is EBIT in year 2?
5. What is the level of NWC in year 4?
6. What is the increase in NWC in year 2?
7. What is the project’s cash flow in year 0?

Explanation / Answer

Yes it's correct. I get the same numbers.

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