Soylent Green is considering a new three-year expansion project to try a new product line in its cookie business. The initial outlay in fixed assets is $2.7 million and will be depreciated straight-line to zero over its three year tax life. There is an additional investment in net working capital of $300,000. After the 3 years the company will shut down operations and scrap the remaining assets for $210,000. Yearly sales and COGS will be $2,080,000 and $775,000 respectively. Assume that the cost of equity is 12% and the tax rate 35%. What is the projects operating cash flow for each of the three years?

Question 2Answer

a.

$2,134,621.20

b.

$2,939,530.02

c.

$1,163,250.00

d.

$1,502,899.04