You are evaluating a project for your company. Equipment for the project has a cost of $250,000. there will also be a delivery expense of $35,000 and installation expenses of $65,000. This equipment will be depreciated as a 7 year asset under MACRS. It is expected to have a salvage value of $30,000. At the end of the project's life, the equipment will be sold for it's salvage value. In addition, a net working capital investment of $100,000 will be made. At the end of the projects life, this net working capital will be allowed to 'cash out'. this project is expected to generate $150,000 each year. the cash operating expenses will be $50,000 each year. In addition additional net working capital of $10,000 will be invested during each year of the project's life. At the end of the project this net working capital will also be returned to cash. Assume that the company's required rate of return is 14% and that the marginal tax rate is 40%
a. What are the Free Cash Flows each year for the Project?
Above is the problem that I am working on, I am confused as to how to set up an income statment or where to even begin on this problem. I will be working this problem on excel.