Question
Saad corporation is considering a new three-year expansion project that requires an initial fixed asset investment of $2 million. The fixed asset falls into the
Saad corporation is considering a new three-year expansion project that requires an initial fixed asset investment of $2 million. The fixed asset falls into the three-year MACRS class (33.33%, 44.45%, 14.81%, 7.41%). The project is estimated to generate $1 million on annual sales, with annual costs of $0.5 million. The project requires an initial investment in net working capital of $300,000 and the fixed asset will have a market value of $200,000 at the end of the project. If the tax rate is 40% and the required return is 9%, what is the cash flowfor year 2?
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