Compute the cash flows for the project

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Reference no: EM131085544

The CEO of the company you are following has asked you to analyze the possibility of acquiring a smaller business operation from another company.

The purchase will cost $90 million in year zero and will also require $2 million of net working capital. The purchase can be depreciated using a four year straight-line depreciation to $10 million. Assume you can sell the business in four years for $15 million.

The new business operation will generate $70 million in revenue each year, which will take $41 million in costs annually.

Use the 35% marginal tax rate.

(1) Compute the cash flows for the project

Reference no: EM131085544

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