Marie's fashions is considering a project that will require $41,000 in net working capital and $64,000 in fixed assets. the project is expected to produce annual sales of $62,000 with associated cash costs of $41,000. the project has a 3-year life. the company uses straight-line depreciation to a zero book value over the life of the project. the tax rate is 34 percent. what is the project cash flow in year 3?

$21,113

Explanation:

Given that,

working capital = $41,000

Present value of outflow = $64,000

Life = 3 years

Sales = $62,000

costs = $41,000

Tax rate = 34 percent

Net cash outflow = working capital + Present value of outflow

                            = $41,000 + $64,000

                            = $105,000

                            = $21,333

Increase in revenue = Sales - costs - Depreciation

                                  = $62,000 - $41,000 - $21,333

                                  = -($333)

Revenue after tax = Increase in revenue - [email protected]%

                              =  -($333) - 0.34 × (-$333)

                              = -($333) + 113.33

                              = -($220)

Cash flow after tax = Revenue after tax + Depreciation

                                =  -($220) + $21,333

                                = $21,113

u = 30

continuing your method

= +

subtract from both sides

= - thus

= -

= ⇒ u = 30

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