Fixed Capital 1251000 Working Capital 148000 Given the following information, what is the initial cash flow?

Salvage Value 308000

Purchase and install new equipment ==> $1771,000

Sale Price of old Equipment ==> $329,000

Book Value 274000

Book Value of old equipment ==> $755,000

At time of installation, inventory will increase by $503,000 and accounts payable will increase by $312,000.

Tax Rate 40% The tax rate is 40%.

Working capital = current assets – current liabilities.

Initial cash flows = FC+WC-S + (S-B) * T Here,

FC = fixed capital, WC = working capital,

S = Salvage value,

B = Book value,

T = Tax rate

Current Asset 374000

Current Liabilities 226000

Initial Cash flow 1104600 (negative)

Answer rating: 100% (QA)

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