Question
A firm is considering an expansion project that will last four years. The project requires an immediate purchase of a new equipment that costs $600,000.
A firm is considering an expansion project that will last four years. The project requires an immediate purchase of a new equipment that costs $600,000. The equipment will be fully depreciated using straight-line method over the next four years. The resale price of the equipment at the end of year three is estimated to be $120,000. The project will generate annual sales of $450,000 and incur annual costs (all costs except depreciation expense) of $350,000 for each of the next four years. The project requires an immediate investment of $100,000 in NWC, which will be fully recovered in year 4. The corporate tax rate is 30%.
Calculate the Cash Flow from Assets (Project Cash Flow) for the project for years 0, 1, 2, 3, and 4.
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