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Operating cash flow and net present value

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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?

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Solution Summary

Your tutorial is in Excel for you. Click on cells to see computations. This is a template you can use for other similar problems.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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