Question
The 3 year class MACRS depreciation rates are (Yr1 = .3333; Yr2 = .4445; Yr3 = .1481; Yr4 = .0741). LeBow, Inc. is considering investment
The 3 year class MACRS depreciation rates are(Yr1 = .3333; Yr2 = .4445; Yr3 = .1481; Yr4 = .0741).
LeBow, Inc. is considering investment in a project which will involve purchase of a $2,700,000 3 year class fixed (depreciable) asset; and an upfront investment in NWC of $300,000. The firm expects to be able to dispose of the asset at the end of Year 3 for $210,000; when it also expects to recover of its upfront NWC investment. The project supported by the fixed assets is expected to generate annual Sales of $2,080,000, with associated costs of $ 775,000. LeBow's tax rate is 35%. MACRS depreciation deductions will be taken.
A) What is the Yr 1 project Net (Total) Cash Flow? (3 POINTS)
B)What is the Yr 3 project Net (Total) Cash Flow? (2 POINTS)
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