The Following Data Is Associated with a Proposed New Project

question 98

Essay

The following data is associated with a proposed new project:
The initial cost of new equipment is estimated to be $15,000; which will be depreciated straight line over five years. Inventory will increase by $2,000 before the project starts and receivables will increase by $1,000 by the end of the first year. These working capital increases will disappear at the end of the project. The project will generate operating earnings of $6,000 per year before consideration of depreciation or taxes. The corporate tax rate is 34%. Develop the project's cash flows.
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Definitions:

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