See years 1 and 4 as examples in Table 1. In year 1, 3 X 425,000 = 1,275,000 637,500 221,100 20,000 = 396,400 158,560 = 237,840 + 221,100 = 458,940 = project NCF = after tax, end-of-year cash inflows, CFt. In year 4, 3 X 425,000 = 1,275,000 637,500 46,900 20,000 = 570,600 228,240 = 342,360 + 46,900 = 389,260.

Cash Flow Statements:

Year 0 Year 1 Year 2 Year 3 Year 4

Unit price $ 3 X X $ 3

Unit sales 425,000 X X 425,000

Revenues 1,275,000 X X 1,275,000

Operating costs 637,500 X X 637,500

Depreciation 221,100 X X 46,900

Other project effects 20,000 X X 20,000

Before tax income 396,400 X X 570,600

Taxes 158,560 X X 228,240

Net income 237,840 X X 342,360

Plus depreciation 221,100 X X 46,900

Net op cash flow 458,940 X X 389,260

Salvage value 100,000

SV tax X

Recovery of NWC X

Termination CF X

Project NCF X X X X X

= = = = =