In: Finance
. You are considering the following project. What is the expected cash flow for the last year (year 3)? This cash flow includes operating cash flow and terminal cash flow.
Project life: 3 years
Equipment:
Cost: $20,000
Economic life: 3 years
Salvage value: $4,000
Initial investment in net working capital: $2,000
Revenue: $13,000 in year 1, with a nominal growth rate of 6% per year
Fixed cost: $3,000 in year 1
Variable cost: 30% of revenue
Corporate tax rate (T): 40%
WACC for the project: 10%
This project does not create incidental effect.
Select one:
a. $12,459.31
b. $12,315.76
c. $12,492.91
d. $12,470.09
e. $12,334.09