H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,590,000 in annual sales, with costs of $1,610,000. If the tax rate is 21 percent, what is the OCF for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Operating Cash Flow (OCF) for the Project
Operating Cash Flow (OCF) = [(Annual Sales - Costs) x (1 – Tax Rate)] + [Depreciation x Tax Rate]
= [($2,590,000.00 - $1,610,000.00) x (1 – 0.21)] + [($2,450,000.00 / 3 Years) x 0.21]
= [$980,000.00 x 0.79] + [$816,666.67 x 0.21]
= $774,200.00 + $171,500.00
= $945,700.00
“Hence, the Operating Cash Flow (OCF) for the Project will be $945,700.00”
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset...
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,590,000 in annual sales, with costs of $1,610,000. If the tax rate is 21 percent, what is the OCF for this project? (Do not round intermediate calculations and round your answer to 2...
H. Cochran, Inc., is considering a new three year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset will be depreciated straight line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,590,000 in annual sales, with costs of $1,610,000. If the tax rate is 21 percent, what is the OCF for this project? (Do not round intermediate calculations and round your answer to...
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