You are evaluating a new project for your company FINSOFT, Inc., which has developed a new financial software. The project requires an initial investment of $420,000 in fixed assets which are to be depreciated straight-line to zero over the 3-year project life. At the end of year 3, all fixed assets are sold for an estimated resale value of $ 105,000. Net Working Capital requirements at the beginning of each year equal 10% of the projected sales during the following year. Projected sales from the new software are $500,000 in year 1, $600,000 in year 2, and $700,000 in year 3. The variable costs amount to 50% of projected sales and fixed costs are $ 60,000 per year. The tax rate is 20%.

Hints:

Change in NWC at t=0 equals 10% of the projected sales at t=1. It is an outflow.

Change in Fixed Assets at t=3 equals the resale value minus the tax on the capital gain. It is an inflow.

QUESTIONS:

Question 1: Operating Cash Flow at t=1 (Year 1) is [ Select ] ["$ 190,000", "$ 40,000", "$ 170,000", "$ 180,000"]

Question 2: Operating Cash Flow at t=2 (Year 2) is [ Select ] ["$ 210,000", "$ 80,000", "$ 200,000", "$ 220,000"]

Question 3: Operating Cash Flow at t=3 (Year 3) is [ Select ] ["$ 280,000", "$ 260,000", "$ 220,000", "$ 230,00"]

Question 4: Change in NWC at t=0 is [ Select ] ["-$ 10,000", "-$ 70,000", "-$ 60,000", "-$ 50,000"]

Question 5: Change in NWC at t=1 (Year 1) is [ Select ] ["-$ 70,000", "-$ 60,000", "-$ 10,000", "-$ 18,000"]

Question 6: Change in NWC at t=3 (Year 1) is [ Select ] ["$ 60,000", "$ 70.000", "$ 180,000", "$ 80,000"]

Question 7: Change in Fixed Assets at t = 0 (initial investment) is [ Select ] ["-$ 420,000", "-$ 290,000", "-$ 350,000", "-$ 470,000"]

Question 8: Change in Fixed Assets at t = 3 (Year 3) is [ Select ] ["$ 105,000", "$ 94,000", "$ 74,000", "$ 84,000"]