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Bate Manufacturing is considering a project with a 7 year life. The data for the project...

Bate Manufacturing is considering a project with a 7 year life. The data for the project are given below. What is the free cash flow in Year 0 for this project?

Sales revenue, each year: $150,000
Variable costs, each year: $20,000
Fixed costs, each year: $10,000
Depreciation expense, each year: $50,000
Initial outlay (i.e. cost of equipment): $300,000
Increase in Net Operating Working Capital: $30,000
Tax rate: 30%

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Answer #1

Free cash flow in Year 0 = Initial outlay

Free cash flow in Year 0 = -$300,000

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