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Use the following to develop cash flows for years 0, 1 and 2. A project for a new line of lawn mowers will cost $1.4
Use the following to develop cash flows for years 0, 1 and 2. A project for a new line of lawn mowers will cost $1.4 million in initial investment and an immediate increase in net working capital of $150,000. Given that the project will run of 7 years, the cost of the equipment will be depreciated 100% to zero on a straight line basis. Annual sales of $450,000 are projected with variable costs = 45% of sales. Annual fixed costs = $15,000 and the applicable tax rate = 22%. years 0 1 2 OCF chg NWC Cap spend Cash flow
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