Question:
A new project requires an initial investment in fixed assets of $40,000. These assets will have a salvage value of $10,000 at the end of the 5 year project after being straight line depreciated over the 5 year period. The project will result in a $35,000 revenue increase and cost the company $22,000 each year. Working capital will need to be increased by $1500 each year of the project, as well. At a tax rate of 34%, what is the operating cash flow and what is the net present value of the project at a 15% discount rate?