Holland Inc. has just completed development of a new cell phone. The new product is expected to produce annual revenues of $1,350,000. Producing the cell phone requires an investment in new equipment, costing $1,440,000. The cell phone has a projected life cycle of 5 years. After 5 years, the equipment can be sold for $180,000. Working capital is also expected to increase by $180,000, which Holland will recover by the end of the new product's life cycle. Annual cash operating expenses are estimated at $810,000. The required rate of return is 8%.

Question

1.

Prepare a schedule of the projected annual cash flows.

Refer to the list below for the exact wording of an amount description within your schedule.

Amount Descriptions
Equipment
Operating expenses
Recovery of working capital
Revenues
Salvage
Total
Working capital

1. Prepare a schedule of the projected annual cash flows. Refer to the list of Amount Descriptions for the exact wording of text items within your schedule. If an amount is negative or an outflow, first enter a minus sign (-).

Holland Inc.

Projected Annual Cash Flows

1	Year 0
2
3
4
5	Years 1-4
6
7
8
9	Year 5
10
11
12
13
14