Question
The Lost in Space corporation is trying to finally build a space ship that won't end up stranding everyone on it in some random part
The Lost in Space corporation is trying to finally build a space ship that won't end up stranding everyone on it in some random part of the galaxy. To do so they are considering a new three-year project that will require an initial investment of $55 million. These initial assets will be depreciated straight-line to zero over their three-year tax life. The firm will be able to sell these assets at the end of the project for $10,500,750. The project is estimated to generate the following revenues during it's three year life: $18,600,235 in year one, $20,975,410 in year two, and $23,412,000 in year three. The firm expects that their costs will be equal to 60% of the projects same year revenues. They expect that project net working capital (in the form of inventory required) will be equal to 14.50% of the next year's revenue. The firms tax-rate is 21%. What is the OCF and CFFA for each year?
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