Question
A firm is considering a project with the following information: Project will require purchase of a machine for $115,105.00 that is MACRS depreciable over a
A firm is considering a project with the following information: Project will require purchase of a machine for $115,105.00 that is MACRS depreciable over a five-year schedule. (no depreciation until end of year 1). Project will require immediate non-depreciable expenses of $27,231.00 TODAY (year 0). Project will have the following projected balance sheet values of NWC: YEAR 0 1 2 NWC Level $4,000 8.00% of sales 10.00% of sales Sales for the project will be $45,368.00 per year, with all other expenses (excluding depreciation) at 45.00% of sales. The tax rate for the firm is 35.00%, while the cost of capital is 10.00% *assume project goes beyond two years What is the projects cash flow for year 2?
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