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3. Suppose we are considering a project that will generate sales of $100,000 per year for 3 years. It has costs of $80,000 per year.
3. Suppose we are considering a project that will generate sales of $100,000 per year for 3 years. It has costs of $80,000 per year. The initial cost of the investment is $50,000, which is depreciated straight line over 5 years. After three years, however, we will sell the equipment associated with the investment for $30,000. Net working capital investment is $20,000. Tax rate is 20%. We finance our company with the following: Bonds: 10,000 bonds outstanding, $1000 face value for each bond, 5% annual coupon, 20 years to maturity, selling at 90% of par ($900 per bond). Equity of 100,000 shares trading at $20 per share. Our equity's beta is 1.6. The market risk premium is 7% and the risk free rate is 3%. . . a. What is this project's Operating Cash Flow (OCF)? b. What is the project's Cash Flow from Assets (CFFA)
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