ABN Company is considering a 4-year project with some information (see the table below) from a...

 

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ABN Company is considering a 4-year project with some information (see the table below) from a Pro Forma income statement. Unit: (In Thousands) Year 1 2 3 4 Sales 6,000 6,000 6,000 6,000 Variable costs 3,000 3,000 3,000 3,000 Fixed costs 500 500 500 500 Depreciation 1,000 1,000 1,000 1,000 EBIT 1,500 1,500 1,500 1,500 Taxes (20%) Net income 300 300 300 300 1,200 1,200 1,200 1,200 The project requires a new equipment which will cost $4,000,000 in year 0. The equipment will be depreciated on a straight-line basis to zero over the 4-year life as shown in the table (ie., each year the depreciation is $1,000,000). The equipment does not have any market value at the end of the project. In addition, the company will need to increase its net working capital by $2,000,000 for the project initially and recover it at the end of the project. Question 3a Determine the cash flows from assets for each year (from year 0 to year 4) for the project. ABN Company is considering a 4-year project with some information (see the table below) from a Pro Forma income statement. Unit: (In Thousands) Year 1 2 3 4 Sales 6,000 6,000 6,000 6,000 Variable costs 3,000 3,000 3,000 3,000 Fixed costs 500 500 500 500 Depreciation 1,000 1,000 1,000 1,000 EBIT 1,500 1,500 1,500 1,500 Taxes (20%) Net income 300 300 300 300 1,200 1,200 1,200 1,200 The project requires a new equipment which will cost $4,000,000 in year 0. The equipment will be depreciated on a straight-line basis to zero over the 4-year life as shown in the table (ie., each year the depreciation is $1,000,000). The equipment does not have any market value at the end of the project. In addition, the company will need to increase its net working capital by $2,000,000 for the project initially and recover it at the end of the project. Question 3a Determine the cash flows from assets for each year (from year 0 to year 4) for the project.

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