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Fiduciary Responsible Tees Corp. is considering launching a new clothing line. The project would require a $18,000,000 capital investment and will be depreciated (straight-line
Fiduciary Responsible Tees Corp. is considering launching a new clothing line. The project would require a $18,000,000 capital investment and will be depreciated (straight-line to zero) over its 4-year life. The company discovers at the end of the project that it will be able to sell the equipment for $5,250,000 (salvage value). Incremental sales are expected to be $12,500,000 annually for the 4-year period with costs (excluding depreciation) of 60% of sales. The project would also require the company to increase inventory levels by $1,380,000. The company has a 21% tax rate. 1. What is the project cash flow (cash flow from assets) for Year O? 2. What is the project cash flow (cash flow from assets) for Year 2? 3. What is the project cash flow (cash flow from assets) for Year 4?
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