You are planning for your retirement. You have $3,000 today to invest and plan on putting in $300 a month until you retire in 30 years at an interest rate of 11%. The month of retirement, you estimate needing $20,000 in expenses. After that, you wish to pull money each month so that there is still $500,000 at the end of your retirement 35 years after you retire. During this time, you can only earn 7% per year. How much can you pull out each month during retirement under this plan?
Use this information for the next 3 questions:
You buy a $2 million building for an 8-year project. You can depreciate it over 20 years. In 8 years, you sell the building for $1.6 million dollars.
Over the 8-year project, you project needing net working capital as follows:
Years 0, 1, 2: you need $100,000 of capital
Years 3, 4, 5: you need $140,000 of capital
Years 6, 7, 8: you need $175,000 of capital
Because you took this project, you foresee sales increasing by $540,000. COGS will increase by $200,000. You'll pay $50,000 of interest on the debt for the building. Your tax rate is 25%.
4) Find the cash flow from selling the building in year 8
5) Find the change in net working capital for year 3
6) Find the operating cash flow each year of the project.
