A 4-year project has an annual operating cash flow of $58,500. At the beginning of the project, $4,950 in net working capital was required, which will be recovered at the end of the project. The firm also spent $23,800 on equipment to start the project. This equipment will have a book value of $5,220 at the end of the project, but can be sold for $6,090. The tax rate is 40 percent. What is the Year 4 cash flow

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6 September, 21:55

A 4-year project has an annual operating cash flow of $58,500. At the beginning of the project, $4,950 in net working capital was required, which will be recovered at the end of the project. The firm also spent $23,800 on equipment to start the project. This equipment will have a book value of $5,220 at the end of the project, but can be sold for $6,090. The tax rate is 40 percent. What is the Year 4 cash flow

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Philip Landry · Answer 1

Net Cash flow in year 4 $46,140

Explanation:

Cash flow represent the amount of cash revenue less out of pocket cash expenditures. Non-cash related items are not included.

Year 4 cash flow;

$

Operating cash flow $58,500

Working capital recouped 4,950

Scrap value 6,090

Tax payable (40%*58500) (23400)

Net Cash flow 46,140