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Ceteris paribus, assume the following: Year Zero: Capital Investment = $6 million and increases of $500,000...

Ceteris paribus, assume the following: Year Zero: Capital Investment = $6 million and increases of $500,000 in needed inventory; Years 1-4: OCF = $4,500,000 per year; Year 4: Recovery of earlier increase in working capital plus cash flow salvage of $2 million. What is the incremental cash flow for this project in year 4?

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Answer #1
Particulars Amount (In $)
Operating Cash Flow (A) 4500000
Add: Working Capital 500000
Add: Salvage Value 2000000
Free Cash Flow (B) 7000000
Cash Flow Increased by (B-A) 2500000
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