Question
A business corporation is considering a new three year project that requires an initial fixed asset investment of $5.6 million. The fixed asset will be
A business corporation is considering a new three year project that requires an initial fixed asset investment of $5.6 million. The fixed asset will be depreciated straight-line to zero over a 4 year life. The project is estimated to generate $3 million in annual sales with variable costs of $700,000 and fixed costs of $300,000. If the tax rate is 25%. Suppose the project requires an initial investment in net working capital of $500,000 and the fixed assets will be sold at market value of $1.8 million at the end of the project. What are the net cash flows for years 0,1,2, and 3 for this project?
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