The five-year projected income statement information is as follows:
Exhibit 1
Year 1 Year 2 Year 3 Year 4 Year 5
Sales 2.4m 3.0m 3.3m 3.6m 4.0m
Cash op. ex. 1.5m 1.8m 2.1m 2.4m 2.7m
Depreciation 500,000 500,000 500,000 500,000 500,000
Operating income 400,000 700,000 700,000 700,000 800,000
Interest 300,000 320,000 350,000 380,000 400,000
Pre-tax income 100,000 380,000 350,000 320,000 400,000
Tax at 25% 25,000 95,000 87,500 80,000 100,000
Net income 75,000 285,000 262,500 240,000 300,000
This project will require investment of $2,500,000 in machinery that will be fully depreciated. Investment of $600,000 in working capital will be recovered when the project is completed. Salvage value of project machinery after 5 years will be $60,000.
The terminal year non-operating cash flow after tax will be closest to:
