90.2K

Verified Solution

Link Copied!

Please help

You are evaluating a new project for your company TEKSOFT, Inc., which has developed a new technical software. As a first step, you need to complete a table indicating the corresponding inflows and outflows at t=0 (initial cash flow), at t=1 (year 1 cash flow), at t=2 (year 2 cash flow), and -at t=3 (year 3 or final cash flow). The project requires an initial investment of $24,000 in fixed assets which are to be depreciated straight-line to zero over the 3-year project life. At the end of year 3, all fixed assets are sold for an estimated resale value of $6.000. Net Working Capital requirements at the beginning of each year equal 10% of the projected sales during the following year. Projected sales from the new software are $80,000 in year 1,$88,000 in year 2, and $98,000 in year 3 . Variable costs amount to 50% of projected sales and fixed costs are $10.000 per year. The tax rate is 20%. Hints: Change in NWC at t=0 equals 10% of the projected sales at t=1. It is an outflow: Change in Fixed Assets at to 3 equals the resale value minus the tax on the capital gain. It is an inflow. QUESTIONS: Question 1: Change in Fixed Assets at t=0 (initial investment) is Question 2: Free Cash Flow at t=0 is Question 3: Operating Cash Flow for Year 1 is Question 4: Change in NWC for Year 1 is Question 5: Operating Cash Flow for Year 2 is Question 6: Free Cash Flow for Y2 is Question 7: Change in NWC for Year 3 is Question 8: Free Cash Flow for Y3 is

Answer & Explanation Solved by verified expert

See Answer