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10.00 points Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.55 million. 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 $2,030,000 in annual sales with costs of $725,000. If the tax rate is 35 percent, what is the OCF for this project? (Do not round Intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567) $ 89,646.1 Hints References eBook & Resources Hint#1 BOO
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Answer #1
Ans. PARTICULARS AMOUNT
Sales 2030000
Less: Costs 725000
Earning before Interest and tax and depreciation 1305000
Less: Depreciation 850000
Earning before tax 455000
Less: Tax @ 35% 159250
Earning after tax 295750
Add: Depreciation 850000
Operating Cash Flow 1145750
*Depreciation = Cost of investment / Life of investment
2550000 / 3
850000
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