(A).

What is the expected operating cash flow for year 2 of a project given the following information. To undertake the project, $334,000 must be spent on new equipment. The equipment has an expected life of 8 years and will be depreciated straight-line over that same period to a book value of 0. New annual sales of $220,000 are expected (expected sales are the same each year). Cost of goods sold are projected to be 43% of sales. Fixed cash operating expenses are $51,000 per year. Tax rate is 27%. In the event EBIT is negative, the firm would have a tax credit based on the 27% tax rate.

a.

72798.80

b.

76733.86

c.

65167.00

d.

81980.62

e.

80013.09

f.

65584.50

(B).

Expected balances of accounts payable, account receivable, inventory are shown below for years 1 and 2 of an investment project. What is the expected working capital cash flow for year 2 of the project? NOTE: Sign of answer matters. Some choices are positive and some are negative.

Accounts Payable balance year 1 = $15,000

Accounts Payable balance year 2 = $32,000

Accounts Receivable balance year 1 = $37,000

Accounts Receivable balance year 2 = $50,000

Inventory balance year 1 = $69,000

Inventory balance year 2 = $80,000