. You are considering the following project. What is the expected cash flow for the last...

. 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

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Expert Solution

jeff jeffy answered 1 year ago

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