Question
A company is currently analyzing the opportunity of investing in a software package for managing their operations in South Korea. The current price for the
A company is currently analyzing the opportunity of investing in a software package for managing their operations in South Korea. The current price for the software package is USD 996512 and it will be depreciated straight line over 8 years. The marketing department estimates annual sales revenues, in the South Korean market, of USD 887574, for the next 3 years; afterwards, due to intense competition, the market for the company's products will cease to exist. Fixed production costs are estimated at 22,5% of the annual sales revenues; variable production costs are estimated at 8,9% of the annual sales revenues. After 3 years the software package is estimated to have a market value of USD 426958. The firm currently estimates an increase in net working capital of USD 29416. Company's tax rate is 34%. What are the relevant cash flows for this investment?
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