Below is the balance sheet for glucose control company as of dec. 31, 2013. assets liabilities and equity cash 13,000 accounts payable 20,000 marketable securities 0 notes payable 6,000 accounts receivable 7,000 total current liabilities 26,000 inventory 34,000 long-term debt 95,000 total current assets 54,000 total liabilities 121,000 machines 34,000 paid-in capital 20,000 real estate 80,000 retained earnings 27,000 total fixed assets 114,000 total equity 47,000 total assets 168,000 total liab.

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?