Estimate the cash flows for each year

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Reference no: EM132799926

Question - Good food Berhad (GFB) is considering introducing new product in the coming year. Forecasted sales generated from the new product is as follows:

Year

Sales (RM)

1

40,000

2

30,000

3

20,000

4

10,000

Expenses are expected to be 40% of sales and working capital required in each year is expected to be 20% of sales for the following year. The new product will require an immediate investment on equipment at a cost of RM45,000. This equipment will be depreciated on a straight-line basis for 4 years with a zero-salvage value. GFB needs to pay tax at a rate of 40% and the tax will be paid in the same year.

Required - From the above information, you are required to: Estimate the cash flows for each year if GFB wants to proceed with the introduction of the new product.

Reference no: EM132799926

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