Question
What is the project cash flow (cash flow from assets) for year THREE? The project requires buying a piece of new equipment costing $300,000, which
What is the project cash flow (cash flow from assets) for year THREE?
The project requires buying a piece of new equipment costing $300,000, which will be depreciated straight-line to zero over 3 years. At the end of the third year of operation, the equipment will be sold for $100,000. The new project will generate $500,000 in annual sales and incur $200,000 in annual cost excluding depreciation for each of the next three years. The project also requires an immediate investment in net working capital of $100,000, which will be fully recovered at the end of three years. The average tax rate for the company is 40%.
$380,000
$320,000
$420,000
$280,000
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