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You have the following information about a project: Year 1 2 3 4 Revenues 80000 90000 100000 70000 Labor Costs 45000 45000 45000 45000 Raw

You have the following information about a project:

Year

1

2

3

4

Revenues

80000

90000

100000

70000

Labor Costs

45000

45000

45000

45000

Raw Material Costs

25000

30000

35000

20000

To implement the project, you need to buy a machine worth $20,000 right now. IRS rules prescribe depreciating the machine over 4 years. At the end of the 4 years, the machine has no salvage value. You must set aside inventory worth $5,000 right now. This inventory increases by 10% every year before it goes to zero at the end of the 4th year. The opportunity cost of capital is 12% and the relevant tax rate is 30%.

What is the cash flow due to change in working capital at the end of the 4th year?

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