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Calculate the annual operating cash flows

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Expansion Project. A machine has a cost of $180. It will have a life of 3 years, and will be depreciated straight line to zero salvage value. It will result in sales revenue of $200 per year and cash operating costs of $110 per year. Use of the machine will require an increase in working capital of $70 for the 3 years, beginning at year 0. The appropriate discount rate is 8% and the firm's tax rate is 40%.

Question a. Calculate the initial cash flow at time 0.

Question b. Calculate the annual operating cash flows (they are identical each year).

Question c. Calculate the relevant terminal cash flows at the end of year 3.

Question d. What is the NPV for the machine?

Reference no: EM132534868

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