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    icgreen's Avatar
    icgreen Posts: 3, Reputation: 1
    New Member

    Nov 18, 2009, 11:38 AM
    Calculate Total Year 10 Cash Flow
    Here's the problem:

    Jefferson Corp is purchasing equipment with a 10-year life which will increase revenue by $38,000 per year and increase expenses by $21,000 per year. The cost of the project is $24,000, and the equipment has a salvage value of $9,000 at the end of the tenth year. The project will require a 6,000 investment in net working capital immediately. The equipment will be depreciated for 10 years using simplified straight line. Jefferson's marginal tax rate is 35%. Calculate the total year 10 net cash flow, including both the last annual cash flow and the project's terminal cash flow.

    Take me through the steps please:confused:
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member

    Nov 18, 2009, 07:12 PM
    We will not work your homework for you. There is, however, an example here, which shows how to deal with the basics and with the depreciation issue:
    Principles of Accounting Chapter 24

    And a bit more info here, which shows some things that affect the cash flows besides just increased revenues:
    Net Present Value Method-Definition|Example|Formula

    See if you can at least give it a shot. (Note that your problem is not asking for the actual present values of the cash flows, but just the cash flows themselves. Doing the present value part is the last step anyway, so your problem includes everything up to there.)

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