Mills mining is considering an expansion project

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Reference no: EM131178487

Mills Mining is considering an expansion project. The proposed project has the following features. The project has an initial cost of $752--this is also the amount which can be depreciated using the following depreciation schedule: Year 1 is 33%, Year 2 is 45%, Year 3 is 15%, and Year 4 is 7%. If the project is undertaken, at t = 0 the company will need to increase its inventories by $85, and its accounts payable will rise by $58. This net operating working capital will be recovered at the end of the projects life (t = 4). If the project is undertaken, the company will realize an additional $595 in sales over each of the next four years (t = 1, 2, 3, 4). The company’s operating cost (not including depreciation) will equal $370 a year. The company’s tax rate is 40 percent. At t = 4, the projects economic life is complete, but it will have a salvage value of $200. The projects WACC = 10 percent. What are the one-time cash flows associated with ending the project (i.e. terminal Cash Flows)?

Reference no: EM131178487

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