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Pure water is to supply the equipment

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Reference no: EM133351668

Pure Water Inc. has obtained a contract from Agua Pura S.A. of Chile to install a new bottling line in its old plant in Santiago. Pure Water is to supply the equipment, the engineering, the technical and administrative staff, and the computer equipment and software. It will employ local labourers in Chile for the plant construction. The value of the contract between Agua Pura S.A. of Chile and Pure Water Inc. is USD 2,000,000. Assume the following parameters:

Monthly fixed cash inflow of USD 175,000

Monthly interest payment will amount to 5 percent of remaining contract amount

Shareholder will need to invest USD 75,000 at the beginning to fund working capital for this contract

Accounts payable amounts to USD 30,000 for the first month and grows at a rate of 10 percent every month

Salaries and wages payable amount to USD 23,500 for the first month and grow at a rate of 5 percent every month

Tax and social benefits are fixed at USD 2,500 per week (assume 52 weeks per year for the purpose of the calculations)

Make a six-month cash flow projection with the information provided. Do not forget to clearly state your assumptions.

Reference no: EM133351668

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