Required information

Use the following information to answer the next three questions:

You are evaluating a new project for Chet Holmgren, Inc. $($CHI$).$ The project requires an initial investment of $$550,000$

which will be depreciated using the $3-$year MACRS schedule $($Year $1=33\%,$ Year $2=45\%,$ Year $3=15\%,$ Year $4=7\%).$ The

project will increase revenues by $$268,000$ and will increase costs by $$65,000$ each year for the next four years. The

project will be sold at the end of $4$ years for $$10,400.$ The project requires an increase in net working capital investment

of $$20,000$ which will be recovered at the end of the project's life. The tax rate is $25\%$ and the required return on the

project is $10\%.$

What is the total initial cash outlay for this project?

Multiple Choice

$-$$$570,000$

$-$$$550,000$

$-$$$530,000$

$-$$$427,500$

What is the operating cash flow for the project in year $2?$

$$152,250$

$$172,875$

$$197,625$

$$214,125$

What is the total cash flow in year $4$ of this project?

$$161,875$

$$134,075$

$$169,675$

$$189,675$