Question
Save Penny Inc. is evaluating a three-year project. Assume that the project will increase sales by $50,000 and costs by $30,000 per year. The project
Save Penny Inc. is evaluating a three-year project. Assume that the project will increase sales by $50,000 and costs by $30,000 per year. The project will incur $15,000 depreciation per year. The applicable tax rate is 34 percent. What is the operating cash flow for this project per year? Save Penny Inc. expects to spend $51,000 upfront for fixed assets and invest an additional $20,000 in net working capital. These fixed assets can be sold for $6,000 after tax at the end of the project (year 3). What is the projected changes in NWC and Capital spending?
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