FAR Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is

Question:

FAR is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $150,000. The cost of shipping and installation is an additional $15,000. The asset will fall into the 3-year MACRS percentages are 33.3%, 44.5%, 14.81%, and 7.41%, respectively. Sales are expected to be $300,000 per year. Cost of goods sold will be 80% of sales. The project will require an increase in net working capital of $15,000. At the end of three years, FAR plans on ending the project and selling the manufacturing equipment for $35,000. The marginal tax rate is 40% and FAR Corporations appropriate is 12%. What is the operating cash flow for year 1?
What is the operating cash flow for year 2?
What is the operating cash flow for year 3?
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