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You are evaluating a new project for your company FINSOFT, Inc., which has developed a new financial software. As a first step, you need

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You are evaluating a new project for your company FINSOFT, Inc., which has developed a new financial software. As a first step, you need to complete a table indicating the corresponding inflows and outflows at t=0 (initial cash flow), at t-1 (year 1 cash flow), at t-2 (year 2 cash flow). and at t-3 (year 3 or final cash flow). The project requires an initial investment of $180,000 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 with an estimated resale value of $ 45,000. 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, $550,000 in year 2, and $600,000 in year 3. Variable costs amount to 50% of projected sales and fixed costs are $ 120,000 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. QUESTIONE

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