Respuesta :
Answer:
The project cash flows for year 0 would be -$12,000,000
The project cash flows for year 1 would be $7,496,850
The project cash flows for year 2 would be$ 7,129,890
The project cash flows for year 3 would be $8,964,260
Explanation:
According to the given data, the calculation of the project cash flows for years 0 through 3 would be as follows:
0 1 2 3
capital investment -10,000,000
initial investment in net -2,000,000
operating working capital.
Incremental sales 12,000,000 12,000,000 12,000,000
less: Annual costs -3,000,000 -3,000,000 -3,000,000
Depreciation - 4,445,000 -3,333,000 -1,481,000
Income before tax 4,555,000 5,667,000 7,519,000
less;tax -1,5031,50 -1,870,110 -2,481,270
Net income 3,051,850 3,796,890 5,037,730
Add:depreciation 4,445,000 3,333,000 1,481,000
After tax sale value 445,530
working capital released 2,000,000
cash flow -12,000,000 7,496,850 7,129,890 8,964,260
Depreciation 1=[10,000,000*0.4445]=- 4,445,000
Tax 1=[4,555,000*0.33]=-1,503,150
Book value at year 3 =10000000*7.41%=741000
Gain/(loss) on sale = 300000-741000=-441000
Tax saving due to loss = 441000*.33 = 145530
After tax sale value =sale value +tax saving
After tax sale value = 300000+145530 = 445530
