Question
Kelly Group is considering a $2M investment in an asset with an economic life of 4years. Cash revenues and expenses in year 1 are expected
Kelly Group is considering a $2M investment in an asset with an economic life of 4years. Cash revenues and expenses in year 1 are expected to be $1.8M and $500k respectively. Both are expected to grow at 3% per year. The asset will fully depreciate to zero using the straight line method over its economic life. The salvage value is expected to be $300k at the end of year 4. The firm also needs to add net working capital of $100k immediately and it will be recovered in full at the end of the project's life. Tax Rate = 40%. What is the investment cash flow in year 4?
I'm having trouble knowing what formulas to use to get the answer to this question.
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