Determine the net terminal year cash flow, Macroeconomics

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A company is assessing a proposed 4-year project.  The depreciable cost will involve the following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for installation. The depreciation life is under the MACRS 3-year class, along with a salvage value of $45,000. The inventories will rise through $18,000 and accounts payable will rise through $3,000. In addition, the new sales are predictable to be 150,000 units per year at $2.25 per unit. There is a variable operating cost which is 60% of sales and the company's marginal tax rate is 35%.  Complete parts (a) through (c) below.

a)  Determine the net operating cash flow for the initial year (Year 0).

b)  Determine the net operating cash flow for Years 1, 2, and 3.

c)  Determine the net terminal year cash flow.

 

 


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