How did they come up with the total cash flows ? what is the formula they used i

Question

How did they come up with the total cash flows ? what is the formula they used in this example

MACRS-20 year MACRS-7 year Jan. 1 2018 Dec. 31 2017 2024 2023 2026 2025 2022 2023 2024 project yr Px/Unit Inflation 200 Volume 100,000 100,000 Sales Fixed Dep: Buildings 20,000,000 20,800,00 21,632,000 22,497,28O 23,397,171 24,333,058 (13,000,000) (13,520,000) (14,060,800) (14,623,232) (15,208,161) 15,816,488) (3,000,000) (3,120,000) 3,244,800) 3,374,592) (3,509,576) 3,649,959) (1,333,333) 1,333,333) (1,333,333) 1,333,333 (1,333,333) 1,333,333) (190.000) (360,000) (335,000) (310,000) (285,000) (265,000) 0.65 Variable 8000000 R&D; amortization (286,000) 490,000 350,000 178,000 178,000 2,190,667 1976,667 2,308,067 2,606,123 2,883,101 3,090,278 04 Taxes 876,267 790,667 923,227 042,449 1,153,240 236,111 OCF: EBIT-Tax+Non-cash 3,123,733 3,369,333 3,403,173 3,457,007 3,526,194 3,630,500 (2,400,000) 2,496,000) (2,595,840) (2,699,674) 2,807,661) 2,919,967) (99,840) (103,834) (107,987) 2,807,661 Additions to NWC 0 (2,400,000) 0 NWC check Capital Costs ATSV Book value Mkt value 1,620,000 1500,000 1,700,000 1,902,000 3,255,000 1,000,000 (1,500,000) (5,000,000) Building (2,000,000) Equipment (2,500,000) (2,500,000) (2,000,000) 407,200 268,000 500,00 (3,200,000) (4,700,000) 2,500,000) (4,500,000) 723,733 3,273,333 3,303,333 3,353,1733,418,207 10,367,361 (4,700,000) (2,252,252) (3,652,301) 529,188 2,156,246 1,960,368 1,792,7431,646,408 4,498.673 1,979,072 Cash Flows 0.11 DCF NPV

Explanation / Answer

For year 1,2,3 - The cash flows are actually capital spent or initial investment required for the project..It is negative because it is paid.

For subsequent years -

total cash flows =

Year 3 = 3123733 - 2400000

Year 4 = 3369333 - 96000 (only additional NWC)

Year 5,6,7 = OCF - Additional NWC

year 8 - OCF + Recovery of working capital + Salvage value recovered.

In calculating operating cash flows Non cash expenses and non cash incomes are excluded as there are not paid/recovered in actual.(Mearly book entries).

Please provide feedback.... Thanks in advance... :-)

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