Expansion project-requires initial fixed asset investment

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Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $1.566 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be sold for $121,800. The project requires an initial investment in net working capital of $174,000, all of which is recovered at the end of the project. The project is estimated to generate $1,392,000 in annual sales, with costs of $556,800. The tax rate is 35 percent and the required return on the project is 10 percent.

What is the project's year 3 net cash flow? HINT: This will include OCF.

Reference no: EM13809592

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