Please answer CF 1-4.

1) Life Period of the Equipment = 4 years				8) Sales for first year (1)			$ 200,000
2) New equipment cost			$ 243,000	9) Sales increase per year			10.3%
3) Equipment ship & install cost			$ (35,000)	10) Operating cost:			$ (120,000)
4) Related start up cost			$ (8,000)	(60 Percent of Sales)		-60%
5) Inventory increase			$ 25,000	11) Depreciation (Straight Line)/YR			$ 50,000
6) Accounts Payable increase			$ 5,000	12) Tax rate			35%
7) Equip. Salvage Value Estimated			$ 15,000	13) Cost of Capital (WACC)			9%
End of Year 4	(fully depreciated )
ESTIMATING Initial Outlay (Cash Flow, CFo, T= 0)
YEAR			CF0	CF1	CF2	CF3	CF4
			0	1	2	3	4
Investments:
1) Equipment cost			$ 243,000
2) Shipping and Install cost			$ (35,000)
3) Start up expenses			$ (8,000)
Total Basis Cost (1+2+3)			$ 200,000
4) Net Working Capital
Inventory Inc.- Acct. Payable Inc.			$ (20,000)	$ -	$ -	$ -	$ -
Total Initial Outlay			$ 180,000

$ 200,000 10.3% $ (120,000) 1) Life Period of the Equipment = 4 years 2) New equipment cost $ 3) Equipment ship & install cost 4) Related start up cost 5) Inventory increase $ 6) Accounts Payable increase $ 7) Equip. Salvage Value Estimated $ End of Year (fully depreciated) 8) Sales for first year (1) 243,000 9) Sales increase per year (35,000) 10) Operating cost: (8,000) (60 Percent of Sales) -60% 25,000 11) Depreciation (Straight Line)/YR 5,000 12) Tax rate 15,000 13) Cost of Capital (WACC) $ 50,000 35% 9% ESTIMATING Initial Outlay (Cash Flow, CFO, T= 0) YEAR CFO CE1 CF1 CF2 CF3 CF4 Investments: 1) Equipment cost 2) Shipping and Install cost 3) Start up expenses Total Basis Cost (1+2+3) 4) Net Working Capital Inventory Inc.- Acct. Payable Inc. 243,000 (35,000) (8,000) 200,000 $ $ (20,000) $ - $ Total Initial Outlay $ 180,000 $ 243,322 $ 268,384 Operations: Revenue Operating Cost Depreciation EBIT Taxes Net Income (LOSS) TAX SHIELD DUE TO LOSS Add back Depreciation $ 200,000 $220,600 $ (120,000) $ 50,000 $ 130,000 $ (45,500) $ 84,500 $ (50,000) Total Operating Cash Flow $ 34,500 Terminal (END of 4th YEAR) 1) Release of Working Capital 2) Salvage value (after tax) Total