Management expects a project to generate EBIT of $600,000 per year for 4 years. Depreciation expense is expected to be $225,000 per year and the corporation’s tax rate is 40%. The project will require an increase in net working capital of $50,000 in year one and allow a decrease in net working capital of $25,000 in year four. The capital expenditure for the project will occur in year zero. What is the free cash flow for the project in year one
Management expects a project to generate EBIT of $600,000 per year for 4 years. Depreciation expense is expected to be $225,000 per year and the corporation’s tax rate is 40%. The project will require an increase in net working capital of $50,000 in year one and allow a decrease in net working capital of $25,000 in year four. The capital expenditure for the project will occur in year zero. What is the free cash flow for the project in year one
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 13P
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Management expects a project to generate EBIT of $600,000 per year for 4 years.
is 40%. The project will require an increase in net working capital of $50,000 in year
one and allow a decrease in net working capital of $25,000 in year four. The capital
expenditure for the project will occur in year zero. What is the
project in year one?
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