ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $831,400.00 work cell. Further, it will cost the firm $51,900.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $64,900.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,800.00. Finally, the firm will invest $11,300.00 in net working capital to ensure the project has sufficient resources to be successful.

The project will generate annual sales of $911,000.00 with expenses estimated at 38.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 40.00%.

The work cell is estimated to have a market value of $490,000.00 at the end of the fourth year. The firm expects to reclaim 84.00% of the final NWC position.

The cost of capital is 13.00%.

What is the yearly operating cash flow for the project?

ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $750,000 work cell. Further, it will cost the firm $50,000 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $60,000. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,000. Finally, the firm will invest $10,000 in net working capital to ensure the project has sufficient resources to be successful. The tax rate facing the firm is 40%. The project will generate annual sales of $900,000 with expenses estimated at 40% of sales. Net working capital will be held constant at $10,000 throughout the project. The tax rate is 40%. The work cell is estimated to have a market value of $500,000 at the end of the fourth year. Further, the firm expects to reclaim 80% of the final NWC position for the project. The cost of capital is 12%. What is the yearly OCF for the project? FCF1=(SalesExpensesDepreciation)x(1T)+DepreciationNWCGrossPPESideEffectsDt=UsefulLifeDepreciableBasisSalvagevalue=20$800,000=$40,000FCF1=($900,000.40x$900,000$40,000)x(10.40)+$40,000$0$0$0FCF1=FCF2==FCF20=$340,000 Note: Since the NWC balance sheet value remains constant over the life of the project, there is no net investment from year to year. So, the change in NWC=$0. The FCFs are equal from year 1 to year 20 as all the inputs are the same from year to year