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Eastern Tech is considering a new project that will require $127,000 of fixed assets and net working capital of $8,000. The fixed assets will be
Eastern Tech is considering a new project that will require $127,000 of fixed assets and net working capital of $8,000. The fixed assets will be depreciated on a straight-line basis to zero salvage value over 3 years. The project is expected to produce an operating cash flow of $49,000 in the first year with that amount decreasing by 5% annually for two years before the project is shut down. The fixed assets can then be sold for $35,000 at the end of the project and all of the working capital will be recovered. The discount rate is 13.9% and the tax rate is 23%
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