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.
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