Three-year life of the project

Reference no: EM131015407

A potential project requires the purchase of $612,000 of equipment. The equipment will be depreciated straight-line to a zero book value over the three-year life of the project. The equipment can be scraped at the end of the project for 45 percent of its original cost. Annual sales from this project are estimated at $418,000 with cash expenses of $287,000. Net working capital equal to 25 percent of sales will be required to support the project. The required return is 12 percent and the tax rate is 35 percent. What is the cash flow in Year 2 of the project?

A. $121,000

B. $154,600

C. $156,550

D. $335,560

E. $296,440

Reference no: EM131015407

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