What is the total cash flow of the project

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Pharm Co., a pharmaceutical company has successfully created a new drug. Assume that Pharm only wants to produce the drug for the next three years. The company estimates that the revenue of the drug will be $50 billion in the first year and increase by 10% every year in the following years. The cost of goods sold and overhead expenses will be 40% of the sales. The production line requires $12 billions of initial investment and will be depreciated linearly over three years. The terminal book value will be $0. At the end of the 3rd year, the machine can be sold for $1 billion. The net working capital will be 10% of the sales every year, but at the end of the third year it will be brought to 0. The corporate tax rate is 40%.

What is the total cash flow of the project every year?

Reference no: EM132703744

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