Consider a capital expenditure project with an expected 10-year economic life and forecasted revenues equal to $40,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000 and the equipment’s estimated salvage value at the end of the project is $9000. The equipment’s $23,000 cost will be depreciated using MACRS depreciation (7 year asset). The projects requires a $7000 working capital investment in year 0 and another $5000 in year 5. The company’s marginal tax rate is 40%. Calculate the expected net cash flow in year 10 in the project.
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