Problem: You are in the finance department of a firm and you are evaluation a project proposal. You have the developed the following financial projections and you are calculating:
a. The incremental cash flows of the project.
b. The net present value of the project given a discount rate of 15%.
The corporate tax rate is 34% and the financial projections are in thousands.
|
year 0
|
year 1
|
year 2
|
year 3
|
year 4
|
year 5
|
|
Sales revenue
|
|
10,000
|
10,000
|
10,000
|
10,000
|
10,000
|
|
Operating costs
|
|
3,000
|
3,000
|
3,000
|
3,000
|
3,000
|
|
Investment
|
17,500
|
|
|
|
|
|
|
Depreciation
|
|
3,500
|
3,500
|
3,500
|
3,500
|
3,500
|
|
Net working capital
|
300
|
350
|
400
|
300
|
200
|
0
|