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Can I get an explanation on the following question? You are considering a 3-year project of which details are summarized below.Your required rate of return

Can I get an explanation on the following question?

You are considering a 3-year project of which details are summarized below.Your required rate of return for capital budgeting purposes is 20 percent.

  • Annual sales = 30,000 units
  • Unit sales price = $5.00
  • Variable costs = $2.50 per unit
  • Annual fixed costs = $18,000
  • Initial capital investment = $72,000, depreciated to zero over 3 years
  • Initial investment in working capital = $20,000, fully recovered at the end of the project
  • The tax rate is 25%.

  1. What is the project's cash flow in year 3?

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