Schwarz, a German firm, is considering a four- year project in China that requires an investment (capital expenditure) of EUR 600,000. The following additional info is presented:
R t = CNY 1,750,000 x 1.15 t -1 (i. e., annual growth rate of revenue is 15 percent)
Direct expenses are 25 percent of revenues.
Fixed expenses are CNY 250,000 annually.
Net working capital for each year equals 25 percent of revenues for the following year. Taxes are 32 percent.
Assume straight- line depreciation for tax purposes. After- tax salvage value is CNY 4 million. Spot EURCNY equals 7.0. What is the CNY cash flow in year 4?