Company ABC is considering a new 5-year investment into new production equipment that requires initial investment € 5 million. The project is expected to generate € 1.4 million in annual sales, with costs of € 0.6 million per year for next 5 years. ABC uses the straight-line depreciation over the 5 years of project life (book value assumed to be zero at the end of the project).
If the tax rate is 35%. What is the annual operating cash flow
of the project? Express your answer in millions of euros.
|Equip ment cost =||$5,000,000|
|intellation cost =||$0|
|Cost capitalised =||5,000,000.00|
|Life of machine(years) =||5|
|Depreciation =||Cost / life in years|
|Less||Tax @ 35%||(70,000.00)|
|Profit after tax||(130,000.00)|
|CASh Inflow ( yearly)||870,000.00|
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