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A project requires an initial investment in equipment of $90,000 as well as an initial investment in working capital of $10,000 (at t=0 ). You
A project requires an initial investment in equipment of $90,000 as well as an initial investment in working capital of $10,000 (at t=0 ). You expect the project to produce sales revenue of $120,000 per year for three years. You estimate manufacturing costs at 60 percent of revenues. (Assume all revenues and costs occur at year-end [i.e., t=1,t= 2 , and t=3]). You depreciate the equipment to zero using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $10,000 and also recover the investment in net working capital. The company has spent $50,000 gathering marketing information over the last year and a half. The corporate tax rate is 30 percent. What are the cash flows (not present value) in years 0,1,2,3
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