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What is the discounted cash flow in the final year of an investment assuming: $7,000 after-tax...

What is the discounted cash flow in the final year of an investment assuming: $7,000 after-tax cash flows from operations, the machine that is depreciated to $2,000 is sold for $4,000, the project had initially required $4,000 in additional working capital, and a 35% marginal tax rate? Assume the investment has a 10-year life and the discount rate is 12 percent.

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Answer #1

Cash Flow after tax = 7,000

After tax Cash inflow from machine = 4000 - 35% (4000 - 2000)

= 4000 - 700

= 3300

Released Working Capital = 4000

Total Cash Inflow at year 10 = 7000 + 3300 + 4000 = 14,300

Present Value = Cash Inflow / (1+r)^n

= 14,300 / (1+0.12)^10

= 4,604.21728295

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