Annual cash flow of project in first year

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You are considering a new project that requires $300,000 investment in a machine, including installation and shipping cost. The life of the machine is three years, and it depreciates via 3-year MACRS methods (33.33%, 44.45%, 14.81%, and 7.41%). If you operate this project, the annual sales of the firm increases by $250,000 a year, and the annual operating expense increased by $100,000. The firm has a marginal tax rate of 34%. In order to start the project, the firm has to invest $30,000 in working capital. The expected market value of the machine is $50,000 in three years when the project is terminated. What is the annual cash flow of this project in the first year?

Reference no: EM132556726

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