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Midtown Inc. is considering a new 4-year project. This project requires equipment costing $250,000, which will...

Midtown Inc. is considering a new 4-year project. This project requires equipment costing $250,000, which will be depreciated using 3-year MACRS over the life of the project. This equipment is estimated to be sold for $10,000 at the end of the project. To get the project ready, it also requires an investment of $40,000 in net working capital, which would increase by $3,000 per year. The project will increase its sales by $110,000 annually and cash expenses by 40% of the new sales. The project’s The company has a marginal tax rate of 26%. Compute the project net cash flows for Year 1 and Year 4.

Use the MACRS table below for simplicity.

Year

MACRS

1

0.33

2

0.45

3

0.15

4

0.07
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