Margarite's Enterprises is considering a new project. The project will require $325,000 for new fix
Margarite's Enterprises is considering a new project. The
project will require $325,000 for new fixed assets, $160,000 for
additional inventory and $35,000 for additional accounts
receivable. Short-term debt is expected to increase by $100,000 and
long-term debt is expected to increase by $300,000. The project has
a 5-year life. The fixed assets will be depreciated straight-line
to a zero book value over the life of the project. At the end of
the project, the fixed assets can be sold for 25% of their original
cost. The net working capital returns to its original level at the
end of the project. The project is expected to generate annual
sales of $554,000 and costs of $430,000. The tax rate is 35% and
the required rate of return is 15%.
What is the cash flow recovery from net working capital at the end
of this project?