Question
A proposed investment equipment has a cost of $2,300. It will has a life of 3 years. The cost will be depreciated straight-line to a
A proposed investment equipment has a cost of $2,300. It will has a life of 3 years. The cost will be depreciated straight-line to a zero salvage value, but will have a market worth $563 at the end of the life of the project. Cash sales will be $2,890 per year and cash costs will run $109 per year. The firm will also need to invest $120 in net working capital at year 0, $320 in year one, $500 in year two, and $515 in year three. Marketing research last year cost $440 and on-going advertising cost $127 each year. Land on the back of the property that is idle will be used for the project and it has a market value of $800. The corporate marginal tax rate is 35% and the average tax rate is 30%.
What are the cash flows (CFFA) in years 0, 1, 2, and 3?
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