Estimate the net incremental cash flows

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Reference no: EM131303345

Johnsons chemical is considering an investment project. the project requires an initial outlay of $3million for equipment and machinery. sales are projected to be $1.5million per year for the next four years. the equipment will be fully depreciated straight line by the end of the year 4. cost of goods sold and operating expenses(not including depreciation) are predicted to be 30% of sales. the equipment can be sold for $ 400,000 at the end of year 4. Johnson chemicals also needs to add net working capital for $ 100,000 immediately. the net working capital will be recovered in full at the end of the fourth year. assume tax rate is 40% and the cost of capital is 10%, estimate the net incremental cash flows.

Reference no: EM131303345

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