(Isolate working capital) 1. A potential contract with a government agency is expected to generate the following...
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(Isolate working capital)
1. A potential contract with a government agency is expected to generate the following revenue per annum for the next 6 years. "After-tax operating cash flows" for each year are also shown below. The after-tax operating cash flows are prior to consideration of working capital.
Revenue Net Operating Cash Flow (before consideration of WC)
Year 1 $600,000 $120,000
Year 2 650,000 130,000
Year 3 675,000 135,000
Year 4 700,000 140,000
Year 5 700,000 140,000
Year 6 650,000 130,000
- The project will have an initial outlay of $450,000. The firm uses a cost of capital of 11%. What is the NPV of the project without consideration of working capital?
b) Now consider, the government agency is expected to be a slow pay with an A/R of 175 days. What is the revised NPV of the project?
Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
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