A project has the following projected financial data for its first year of operation. ITEM AMOUNT...

A project has the following projected financial data for its first year of operation. ITEM AMOUNT Sales $500,000 Cost of Goods $200,000 Other expenses $100,000 Depreciation $50,000 Investment in NWC $20,000 Investment in Gross PPE $0 Interest Expense $40,000 If the tax rate for the firm is 30%, what is the project cash flow for the first year based on this information? Question 10 options: $75,000 $107,000 $135,000 $155,000 $205,000

Expert Solution

Project cash flow for year 1 will be PAT + Depreciation - Investment in NWC - Investment in Gross PPE

First, we need to calculate PAT:

Sales	$ 500,000
Less: COGS	$ 200,000
Gross Profit	$ 300,000
Less: Other Expenses	$ 100,000
Less: Depreciation	$ 50,000
EBIT	$ 150,000
Less: Interest	$ 40,000
EBT	$ 110,000
Less: Tax	$ 33,000
PAT	$ 77,000

Project cash flow for year 1 = $77,000 + $50,000 - $20,000 = $107,000

jeff jeffy answered 2 years ago

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