Source:

1. What yearly cash flows are relevant for this investment decision? Do not forget the effect of taxes and the initial investment amount. Complete the table below using the detail summarized below:
   1. Investment:
      1. Initial Investment - $16M 2016, $2M 2017
      2. Working Capital - 10% of Incremental Sales
   2. Operating Savings - $2M 2017, $3.5M 2018-2022
   3. Sales Revenue - $4M 20017, $10M 2018-2022
   4. Expenses - CGS 75% of Revenue, SG&A - 5% of Revenue
   5. Salvage:
      1. Working Capital - recoverable at cost
      2. Initial Investment - 10% or $1.8M before tax, $1.08M after taxes
   6. Depreciation Straight Line over 6 years, no salvage, start in 2017

	2016	2017	2018	2019	2020	2021	2022
Investment:
Capital Outlay
Net Working Capital (10% Sales)
Total Investment
Investment Recovery :
Equipment Salvage
Net Working Capital (full recovery)
Earnings before Interest and Taxes (EBIT):
Sales Revenue
Cost of Goods Sold (75% Sales)
SG&A (5% Sales)
Operating Savings
Depreciation ($18,000/6)
Total Costs & Expenses
EBIT
- Taxes (40%)
NOPAT
+ Depreciation
- Investment
= Free Cash Flow