Question: Project X will require ABC Corp. to purchase equipment at time zero equal to $4,000 Inventory will increase by $200 Accounts payable will rise by

Project X will require ABC Corp. to purchase equipment at time zero equal to $4,000
Inventory will increase by $200
Accounts payable will rise by $35
All other working capital components will stay the same $0
Change in operating networking capital is $165
Dollar value of sales in year one $17,000
Dollar value of sales in year two $18,000
Dollar value of sales in year three $19,000
Dollar value of sales in year four $20,000
The fixed cost of producing the product in year 1 $1,169
The fixed cost of producing the product in year 2 $1,169
The fixed cost of producing the product in year 3 $1,169
The fixed cost of producing the product in year 4 $1,169
The variable cost of producing the product in year one is $11,900
The variable cost of producing the product in year two is $12,600
The variable cost of producing the product in year three is $13,300
The variable cost of producing the product in year four is $14,000
The accelerated depreciation in year one is $1,320
The accelerated depreciation in year two is $1,800
The accelerated depreciation in year three is $600
The accelerated depreciation in year four is $280
Salvage value on the equipment in year four is $50
The amount of net operating working capital recovered in year four is $75
The estimated tax rate is 28%
WACC = 5%

Given the information in the table, what is the Free Cash-flow in year 3?

$3,430
$3,535

$3230

$3,630

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!