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Find the cash flows for the project for years

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Reference no: EM133160585

Question - New West Amazing Products {NWAP} is considering a project which will require the purchase of $1.6 million in new equipment. The equipment belongs in a 20% CCA class. NWAP expects to sell the equipment at the end of the project for 20% of its original cost. Annual sales from this project are estimated at $1.4 million. Net working capital equal to $240,000 will be required to support the project. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. The project span is three years, and the annual costs are 12% of the sales.

Required -

a. Find the Cash Flows for the project for years 0, 1, 2 and 3.

b. If the question asked you to find IRR, how the cash flows found in item a) would be calculated differently? Why? Explain. (For item b, do not calculate the values; only provide the explanation.)

Reference no: EM133160585

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