Compute the annual operating cash flows.WILL RATE HIGH!!!

QUESTION

BALANCE SHEETCash 2,000,000 Accounts Payable and Accruals 18,000,000Accounts Receivable 28,000,000 Notes Payable 40,000,000Inventories 42,000,000 Long-Term Debt 60,000,000Preferred Stock 10,000,000Net Fixed Assets 133,000,000 Common Equity 77,000,000Total Assets 205,000,000 Total Claims 205,000,000&

Well you have quite the capital budgeting problem here, complete with plenty of irrelevant and relevant cash flows.  When you are trying to analyze cash flows in any capital budgeting problem you have to break them down into smaller parts otherwise you wont have a good place to start.  There are 3 big groups to put your cash flows in that will organize this problem 1. initial outlay 2. project life 3. terminal year.

Lets start with the initial outlay  These cash flows happen at year zero (or today) if we decide to do the project.  They include things like initial investment, net working capital changes, and any other relevant cash flows that happen at time 0 of the project.

1. Initial Outlay

Initial Investment: -15,000,000 -2,000,000 = -17,000,000

ANSWER:

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