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Given the below details, the initial capital investment is $3 million, the tax rate is 32%, cash flow from salvage (after taxes) in Year 3
Given the below details, the initial capital investment is $3 million, the tax rate is 32%, cash flow from salvage (after taxes) in Year 3 is projected to be $1.5 million, and the WACC is 12.8%. What is the net incremental cash flows for Period 1 expected to be?
| Year 0 | Year 1 | Year 2 | Year 3 |
Proforma Income Statement | ||||
Projected revenues | $2,225,000 | $3,250,000 | $4,900,000 | |
Cost of revenues | $1,390,625 | $2,185,000 | $3,315,000 | |
Gross profit | $834,375 | $1,065,000 | $1,585,000 | |
Depreciation | $1,000,000 | $1,000,000 | $1,000,000 | |
Operating expenses | $267,000 | $390,000 | $576,000 | |
Operating profit | ($432,625) | ($325,000) | $9,000 | |
EBIT | ($432,625) | ($325,000) | $9,000 |
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