Find the after-tax cash flow from the sale of the equipment

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Reference no: EM132832847

Your company is considering a project that will generate sales revenue of $120 million in Year 1. Revenue growth is 3% per year for subsequent years. The project requires working capital equal to 15% of sales revenue, and has total operating costs excluding depreciation equal to 51% of sales. The equipment has a 3-year MACRS life and can be purchased and installed for $106 million. The project will end in three years. At that time, the equipment can be sold for $4.5 million. Your company's tax rate is 35% and the WACC is 12%.

Problem a) Find the initial cash flow (Yr. 0).

Problem b) The working capital investment in the appropriate year.

Problem c) Find the operating cash flows (Yrs. 1-3).

Problem d) Find the after-tax cash flow from the sale of the equipment.

Problem e) Find the total flow that occurs in Yr. 3.

Reference no: EM132832847

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