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3.2 The following events are assumed to take place at time 1. Determine the cash flow...

3.2 The following events are assumed to take place at time 1. Determine the cash flow for investment evaluation purposes. The tax rate is 0.35.

Credit sales $40,000

Cash sales 100,000

Out-of-pocket expenses 75,000

Income taxes 9,800 (reflects the $7,000 interest expense tax shield and the $30,000 depreciation)

Depreciation (accounting) 20,000

Depreciation (tax) 30,000

Change in net working capital (increase) 8,000 (includes $28,000 of accounts receivable that only costs $20,000 incrementally)

Interest expense 7,000

Principal payment 16,000

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