What is the cash flow from assets for project in each year

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Question - Frozen Fruitcakes International Inc. is considering the following project. They want to introduce a new line of pastries and desserts. The sales for this division are expected to be $500,000 per year for each of the next 3 years. For this expansion you are able to use some of your existing machines that are currently not being used. Four years ago you paid $250,000 for these machines and the current market value of the machines is $110,000. You have been using a 5-year straight-line full depreciation on these machines. There is no need to buy any additional equipment. Variable costs for the division are projected at 65% of sales. Fixed costs are 100,000 per year. Total net working capital requirements are $75,000 at the start, $100,000 in year 1, and $50,000 in year 2. Net working capital will be recovered at the end of three years. The tax rate is 34%. What is the cash flow from assets for this project in each year?

Reference no: EM132920071

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