Info

Labor

$150,000

$165,000

$181,500

$199,650

Materials

$900,000

$1,080,000

$1,188,000

$1,306,800

Depreciation

$250,000

$250,000

$250,000

$250,000

Operating Income

$200,000

$305,000

$360,500

$421,550

Taxes

$80,000

$122,000

$144,200

$168,620

After-tax Operating Income

$120,000

$183,000

$216,300

$252,930

To get from operating income to cash flows, we add back the depreciation charges and subtract out the working capital requirements (which are the changes in working capital from year to year). We also show the initial investment of $ 1 million as a cash outflow right now (year 0) and the salvage value of the entire working capital investment in year 4.

Table 5.3: From Operating Income to After-tax Cashflows
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