Calculate the expected net cash flows for year three

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Reference no: EM13928715

Hayward Enterprises, a successful imaging products firm, is considering expanding into the lucrative laser-engraved self-portrait business. It is expected that this new business will generate first-year revenues of $2 million. These revenues are expected to grow at 10 percent per year for the next 8 years. Year 1 incremental operating costs of this new business are expected to total $800,000 and to grow at 6 percent per year for the next 8 years. The firm's marginal tax rate is 40 percent, but its aver- age tax rate is only 35 percent. Depreciation expenses are expected to be $100,000 during year 1, $200,000 during year 2, and $150,000 during year 3. Capital outlays required at time 0 total $2 million, and another $500,000 will be required at the end of year 1. Net working capital investments of $50,000, $75,000, and $85,000 are expected at the end of years 1, 2, and 3 respectively. Calculate the expected net cash flows for year 3.

Reference no: EM13928715

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