Consider again Example 10.4. Use the generalized cash flow approach to obtain the after-tax cash…

Generalized Cash Flow Approach

Consider again Example 10.4. Use the generalized cash flow approach to obtain the after-tax cash flows:

TABLE 10.7 Cash Flow Statement for Example 10.4 Using the Generalized Cash Flow Approach012345Investment$(125,000)  Net proceeds from sale  $43,387Investment in   working capital(23,331)  Recovery of   working capital  23,331(Revenue) (1 -0.40)$ 60,000$ 60,000$ 60,000 $ 60,000 $ 60,000(Expenses)-(1 -0.40)(24,000)(24,000)(24,000) (24,000) (24,000)(Debt interest)-(1 -0.40)(3,750)(3,136)(2,460) (1,717) (899)(Depreciation)+(0.40)7,14512,2458,745 6,245 2,232Borrowed funds62,500  Repayment of principal(10,237)(11,261)(12,387) (13,626) (14,988)Net cash flow$ (85,831) $ 29,158$ 33,849$ 29,898 $ 26,903 $ 89,063         

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