Ceteris

paribus,

assume the following: Year Zero: Capital Investment = $5 million and increase of $250,000 in needed inventory; Years 1 - 4: OCF = $4 million per year; Year 4: Recovery of one-half the earlier increase in working capital plus cash flow from salvage of $3 million. What is the incremental cash flow for this project in year 4?

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Part 1

A.

$6.500 million

B.

$4.575 million

C.

$7.125 million

D.

$2.525 million