TaiGueLe Enterprises, Inc. is considering launching a new corporate project. The company will have to make Capital Investments, Working Capital investments, and generate Cash Flows from Operating the new project. The Equipment required for the project will cost $9,000,000 today, will last for six years (the length of the project), and is estimated at the time of purchase to sell for $600,000 at the end of its life. The company uses Straight-Line depreciation and has a Tax Rate of 27%. The appropriate discount rate for the risks involved is 15%.

Operating estimates for the project follow:

Year 1 2 3 4 5 6

Revenue $5,000,000 $5,300,000 $5,600,000 $5,900,000 $6,000,000 $5,000,000

Cash Expenses 2,400,000 2,544,000 2,688,000 2,832,000 2,880,000 2,500,000

Depreciation 1,400,000 1,400,000 1,400,000 1,400,000 1,400,000 1,400,000

End of Year NWC 500,000 530,000 560,000 590,000 600,000 500,000

Per your DCF analysis of the project, what is the cash flow from the change in net working capital in year three?

Multiple Choice

An inflow of $560,000

An outflow of $100,000

An outflow of $30,000

None of the above

An inflow of $30,000