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Calculate the incremental change to cash flow in the final year of this project. The project requires an initial investment of $382,000 for fixed
Calculate the incremental change to cash flow in the final year of this project. The project requires an initial investment of $382,000 for fixed assets and $83,000 for net working capital. The fixed assets will be depreciated straight-line to a book value of zero over the 7-year life of the project. At the end of the project, the fixed assets will be sold for $286,000 before taxes, and the net working capital will return to its original level. This project will generate $465,000 of operating cash flow annually. The company's marginal tax rate is 28% and the required return for this project is 11%.
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