Final-Answer:
To calculate the net cash flow, we need to first calculate the contribution margin, which is the difference between the sales and the variable costs. In this case, the contribution margin is 37.5% of sales, so the contribution margin for each year is as follows:
Year 1: $1,200,000 x 37.5% = $450,000
Year 2: $1,680,000 x 37.5% = $624,000
Year 3: $3,040,000 x 37.5% = $1,120,000
Year 4: $2,560,000 x 37.5% = $940,000
Year 5: $1,920,000 x 37.5% = $720,000
Next, we need to subtract the fixed costs from the contribution margin to get the operating profit. In this case, the fixed costs are $160,000 per year, so the operating profit for each year is as follows:
Year 1: $450,000 - $160,000 = $290,000
Year 2: $624,000 - $160,000 = $464,000
Year 3: $1,120,000 - $160,000 = $960,000
Year 4: $940,000 - $160,000 = $780,000
Year 5: $720,000 - $160,000 = $560,000
Finally, we need to add the depreciation expense to the operating profit to get the net profit. In this case, the depreciation expense is $1,500,000 / 5 years = $300,000 per year, so the net profit for each year is as follows:
Year 1: $290,000 + $300,000 = $590,000
Year 2: $464,000 + $300,000 = $764,000
Year 3: $960,000 + $300,000 = $1,260,000
Year 4: $780,000 + $300,000 = $1,080,000
Year 5: $560,000 + $300,000 = $860,000
Therefore, the net cash flow for each year is the operating profit plus the depreciation expense, which is as follows:
Year 1: $590,000
Year 2: $764,000
Year 3: $1,260,000
Year 4: $1,080,000
Year 5: $860,000
