Operating Income










After-tax Operating Income





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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