A firm is considering a project with the following
- Project will require purchase of a machine for $103,750.00 that
is MACRS depreciable over a five-year schedule. (no depreciation
until end of year 1).
- Project will require immediate non-depreciable expenses of
$29,227.00 TODAY (year 0).
- Project will have the following projected balance sheet values
||8.00% of sales
||9.00% of sales
- Sales for the project will be $47,014.00 per year, with all
other expenses (excluding depreciation) at 49.00% of sales.
- The tax rate for the firm is 34.00%, while the cost of capital
*assume project goes beyond two years
What is the project cash flow for year 0?
What is the project’s cash flow for year 1?
What is the project’s cash flow for year 2?