NARRBEGIN: Exhibit 9-2
Exhibit 9-2
The following data are projected for a possible investment project:

-Refer to Exhibit 9-2.The project requires an initial investment of $300,000.Working capital is anticipated to be variable at 10% of revenues; the working capital investment must be made at the beginning of each period,and will be recaptured in full at the end of year 4.The tax rate is 40%. What is the net cash flow to the firm in year 1?

Question

NARRBEGIN: Exhibit 9-2
Exhibit 9-2
The following data are projected for a possible investment project:
 
-Refer to Exhibit 9-2.The project requires an initial investment of $300,000.Working capital is anticipated to be variable at 10% of revenues; the working capital investment must be made at the beginning of each period,and will be recaptured in full at the end of year 4.The tax rate is 40%. What is the net cash flow to the firm in year 1?

Quizplus · Accepted Answer

Operating cash flow = 4,000*0.6 NI + 80,000 depreciation = 82,400
Change in working capital = 12,000 - 14,000 = -2,000
Net cash flow = 82,400 - 2,000 = 80,400

NARRBEGIN: Exhibit 9-2 Exhibit 9-2