The following information is available about an investment opportunity: Initial Capital Expenditure $3 Million Annual Sales (in units) 100,000 Selling price per unit $50 Cost per unit $20 Project life 3 years Salvage value $0 Depreciation Straight line, over life of the project Tax rate 35% WACC 20% Initially the project requires an increase in net working capital of $600,000, but it will be recovered after the project’s life. Calculate the project’s cash flows in years 0, 1, 2, and 3. (hint: pay attention to the working capital change):
The following information is available about an investment opportunity:
Initial Capital Expenditure $3 Million
Annual Sales (in units) 100,000
Selling price per unit $50
Cost per unit $20
Project life 3 years
Salvage value $0
Tax rate 35%
WACC 20%
Initially the project requires an increase in net working capital of $600,000, but it will be recovered after the project’s life.
Calculate the project’s cash flows in years 0, 1, 2, and 3.
(hint: pay attention to the working capital change):
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)