Suppose Amazon has decided to introduce the Echo III. Before they launch the Echo III,...
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Finance
Suppose Amazon has decided to introduce the Echo III. Before they launch the Echo III, they conducted an analysis to see if the Echo II would be a desirable investment. The company estimated that it would sell 10 million Echo IIIs per year at a price of $250 for the next six years. The initial capital outlay is determined to be $1.25 billion and a $600 million outlay in net working capital would also be required. Assume that the equipment used will be depreciated using the MACRS 7 year schedule and that the equipment has a salvage value of zero. At the end of year 6, the equipment will be sold for its book value. Also, assume that that the tax rate is 25%.
Using information from Amazons financial statements (you may want to use Morningstar.com or some other online site) estimate the operating cash flows from the project. Make any simplifying assumptions that are necessary to produce the estimate.
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