Question

ou are a part of a finance team in a firm, and you were asked by your boss to estimate the annual cash flows of a project. You estimated that the annual sales and costs of this project is $150,000 and $25,000 respectively. In order to start the project, the firm needs to invest in $300,000 in new equipment including shipping and installation, and $30,000 in working capital. The life of this asset is 3 years, and the project will be terminated after 3 years of operations. The equipment will depreciate via simplified straight-line method, and the estimated market value of the machine in 3 years is $20,000. The firm has a marginal tax rate of 22%. What is the total annual cash flow of the first year of this project

Answer 1

The answer is negative cash flow or net cash out flow of Rs. (205,000)

Step-by-step explanation:

Annual sales 150,000

Cost (25,000)

Equipment (300,000)

Working capital (30,000)

Net cash out flows (205,000)