Problem:
A company is evaluating a proposed 4-year project. The depreciable cost will include the following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for installation. The depreciation life is under the MACRS 3-year class, with a salvage value of $45,000. The inventories will rise by $18,000 and accounts payable will rise by $3,000. In addition, new sales are estimated to be 150,000 units per year at $2.25 per unit. There is a variable operating cost that is 60% of sales and marginal tax rate is 35%.
Required:
Question: Determine net operating cash flow for Years 1, 2, and 3.
Note: Be sure to show how you arrived at your answer.