Annual depreciation=(Cost-Salvage value)/Useful Life
=(2,754,000/3)=$918000
OCF=(Sales-Costs)(1-tax rate)+Tax savings on Annual depreciation
=(2,448,000-979200)(1-0.21)+(0.21*918000)
=$1353132
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $3.834 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $3,408,000 in annual sales, with costs of $1,363,200. If the tax rate is 22 percent, what is the OCF for this project?
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