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Unformatted text preview: Any increase in NOWC is a negative cash flow, and any decrease is a positive cash flow. Year 0 Year 1 Year 2 Year 3 Year 4 Sales $250,000 $257,500 $265,225 $273,188 NOWC (% of sales) $30,000 $30,900 $31,827 $32,783 $0 CF due to NOWC) ($30,000) ($900) ($927) ($956) $32,783 f. Calculate the after-tax salvage cash flow. Answer: When the project is terminated at the end of year 4, the equipment can be sold for $25,000. But, since it has been depreciated to a $0 book value, taxes must be paid on the full salvage value. For this project, the after-tax salvage cash flow is: Salvage Value $25,000 Tax On Salvage Value (10,000) Net After-Tax Salvage Cash Flow $15,000...
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- Spring '08