The project will require RM325,000 for new fixed assets, and RM195,000 for additional investment in current assets.
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Question:
The project will require RM325,000 for new fixed assets, and RM195,000 for additional investment in current assets. The project has a 5-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 25 percent of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of RM554,000 and costs of RM430,000. The tax rate is 35 percent and the required rate of return is 15 percent. What is the amount of the annual operating cash flow of this project?
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