Chapter 15, Problem 84IIP

General accounting

TechNova Inc. is starting a new project expected to generate $1,200,000 in revenues, $400,000 in cash operating expenses, and depreciation expense of $200,000 per year for 8 years. The corporate tax rate is 30%. The project will require an increase in net working capital of $100,000 in year one and a decrease in net working capital of $90,000 in year eight. What is the free cash flow from the project in year one? A) $520,000 B) $530,000 C) $540,000 D) $550,000

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