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					         Problem Set: Cash Flow Estimation
                (Solutions Below)
Depreciation

         1. Using MARCS depreciation schedule, find the depreciable amounts of for
            an investment of $1,000,000.

         2. Using MARCS depreciation schedule, find the depreciable amounts of for
            an investment of $5,000,000.

         3. Using MARCS depreciation schedule, find the depreciable amounts of for
            an investment of $250,000.

Working Capital
   Note: These problems show the year-to-year change in net working capital. They do
   not include the release of all working capital in the final year.

         4. Find the changes in working capital for a project that requires an initial
            working capital of $10,000 and must maintain a working capital of 12% of
            sales.

           Year           0               1              2              3
           Sales          ----            $150,000       $125,000       $100,000

         1. Find the changes in working capital for a project that requires an initial
            working capital of $25,000 and must maintain a working capital of 8% of
            sales.

           Year           0               1              2              3
           Sales          ----            $300,000       $400,000       $500,000

         5. Find the changes in working capital for a project that requires an initial
            working capital of $1,000 and must maintain a working capital of 12% of
            sales.

           Year           0               1              2              3
           Sales          ----            $10,000        $8,000         $6,000
                                               Solutions
Depreciation

          2. Using MARCS depreciation schedule, find the depreciable amounts of for
             an investment of $1,000,000.

      Year                        0               1               2             3             4              5             6
      MARCS                                  20.00%          32.00%        19.20%        11.52%         11.52%         5.76%
      Investment     $1,000,000
      Depreciation                     $200,000.00      $320,000.00    $192,000.00   $115,200.00   $115,200.00    $57,600.00


          3. Using MARCS depreciation schedule, find the depreciable amounts of for
             an investment of $5,000,000.

      Year                    0                  1                2              3             4             5              6
      MARCS                                 20.00%           32.00%         19.20%        11.52%        11.52%          5.76%
      Investment     $5,000,000
      Depreciation                    $1,000,000.00    $1,600,000.00   $960,000.00   $576,000.00    $576,000.00   $288,000.00


          4. Using MARCS depreciation schedule, find the depreciable amounts of for
             an investment of $250,000.

      Year                    0                  1                2              3             4              5             6
      MARCS                                 20.00%           32.00%         19.20%        11.52%         11.52%         5.76%
      Investment      $250,000
      Depreciation                       $50,000.00      $80,000.00     $48,000.00    $28,800.00     $28,800.00    $14,400.00




Working Capital

          5. Find the changes in working capital for a project that requires an initial
             working capital of $10,000 and must maintain a working capital of 12% of
             sales.

             Year                 0                        1                   2                   3
             Sales                ----                     $150,000            $125,000            $100,000

      Year                                            0                1                 2                  3
      Sales                                           ----             $150,000          $125,000           $100,000
      Working Capital Needed                          $10,000          $18,000           $15,000            $12,000
      Change in Net Working Capital                   $10,000          $8,000            ($3,000)           ($3,000)

          6. Find the changes in working capital for a project that requires an initial
             working capital of $25,000 and must maintain a working capital of 8% of
             sales.

             Year                 0                        1                   2                   3
             Sales                ----                     $300,000            $400,000            $500,000
Year                            0             1              2                 3
Sales                           ----          $300,000       $400,000          $500,000
Working Capital Needed          $25,000       $24,000        $32,000           $40,000
Change in Net Working Capital   $25,000       ($1,000)       $8,000            $8,000

   7. Find the changes in working capital for a project that requires an initial
      working capital of $1,000 and must maintain a working capital of 12% of
      sales.

     Year             0             1               2                 3
     Sales            ----          $10,000         $8,000            $6,000

Year                            0             1              2                 3
Sales                           ----          $10,000        $8,000            $6,000
Working Capital Needed          $1,000        $1,200         $960              $720
Change in Net Working Capital   $1,000        $200           ($240)            ($240)

				
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