The incremental cash flows for the five years of operations are shown in the table below:Incremental Cash flowsYearInitial InvestmentWorking CapitalDiscount FactorDiscounted Working CapitalUnits SoldUnit PriceRevenueWorking Capital LiquidationTotal Cash flow0-$8,000,000-$100,0001-$100,000-$8,199,9991-$2,100,0000.... 972-$775,63260000$260$15,600,000$9,557,572$23,597,572Working Capital Liquidation$9,557,572Conversely, the accounting earnings for the five years are shown in the table below:Accounting EarningsYear12345Units Sold700001200001400008000060000Unit Price$300$300$300$300$260Total Revenue$21,000,000$36,000,000$42,000,000$24,000,000$15,600,000Expenses/CostsVariable Cost Per Unit$180$180$180$180$180Total Variable Costs$12,600,000$21,600,000$25,200,000$14,400,000$10,800,000Fixed Costs$200,000$200,000$200,000$200,000$200,000DepreciationWorking Capital$2,100,000$3,600,000$4,200,000$2,400,000$1,560,000Depreciation$1,580,000$1,580,000$1,580,000$1,580,000$1,580,000Total Expenses/Costs$16,480,000$26,980,000$31,180,000$18,580,000$14,140,000Earnings Before Tax$4,520,000$9,020,000$10,820,000$5,420,000$1,460,000Tax$1,536,800$3,066,800$3,678,800$1,842,800$496,400Net Earnings after Tax $2,983,200$5,953,200$7,141,200$3,577,200$963,600The two tables shown above indicate that the incremental cash flows for the five years are higher than the accounting earnings and depict a better picture of the product being introduced....
1 Pages
(250 words)
Assignment