Cash-flow determination in Year 5

You are presented with the following information about an investment project in year 5.

Investment is 2,700,000 (in year 0), with straight-line depreciation throughout the nine years of the project.

Number of years: 9

Units sold: 750 units

Price per unit: 4,000

Cost per unit: 1,500

Other costs in year 5: 500,000

Tax rate: 40%

(a) What is the projects cash-flow in year 5? Please show your calculations.

(b) You now have more information about the components of working capital (accounts receivable, inventories and accounts payable) at the end of years 3 and 4. (c) Re-calculate cash-flow in year 5 with the new information.

	End of year 4	End of year 5
Accounts receivable	88,000	194,000
Inventories	65,000	138,000
Accounts payable	31,000	60,000