a. If the tax rate is 21 percent, what is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not in millions.)
Year 0 net cash flow:
Initial fixed asset investment = $2.29 million
Net working capital investment = $410,000
Total initial investment = $2.29 million + $410,000 = $2,700,000
Year 0 net cash flow = -Total initial investment = -$2,700,000
Year 1 net cash flow:
Sales = $1,790,000
Costs = $684,000
Depreciation = 100% of initial fixed asset investment = $2.29 million
Year 1 net cash flow = Sales - Costs - Depreciation = $1,790,000 - $684,000 - $2,290,000 = -$1,184,000
Year 2 net cash flow:
Sales = $1,790,000
Costs = $684,000
Depreciation = $2.29 million
Year 2 net cash flow = Sales - Costs - Depreciation = $1,790,000 - $684,000 - $2,290,000 = -$1,184,000
Year 3 net cash flow:
Sales = $1,790,000
Costs = $684,000
Depreciation = $2.29 million
Salvage value of fixed asset = $420,000
Year 3 net cash flow = Sales - Costs - Depreciation + Salvage value = $1,790,000 - $684,000 - $2,290,000 + $420,000 = -$764,000