Question: Your company is developing a new textbook for FIN 301 and you paid your current FIN 301 instructor $100,000 for his input about the feasibily
Your company is developing a new textbook for FIN 301 and you paid your current FIN 301 instructor $100,000 for his input about the feasibily of such a product The project would involve initial capital investment of $1.200,000 and installation costs related to the capital expenditures of $600,000. The project would also necessitate an increase in net working capital of $200,000 at the beginning of the project. You can straight line depreclate any depreciable expenses to zero over the three-year ilfe of the project, and you dont expect the capial investnent to be sold at the end of the project. Each year you estimate you will recolve $3,000,000 in sales revenue from your awesome textbook. Variable product and selling costs assictiated with these sales are expected to be 20% of revenue in each of those years. The fxed costs in each of the three yoars of the project will be $600,000. The corporate tax rate is 40% Calculate the total year 0 cash flows associated with the project. Calculate the year 1 EBIT. Cakculate the TOTAL year 1 cash fows associated with the project. Calculate the TOTAL year 3 cash flows associated with the project
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