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Your company is considering a new project whose data are shown below. MACRS rates for the equipment needed for the proje...

Your company is considering a new project whose data are shown below.

MACRS rates for the equipment needed for the project are 33%, 45%, 15%, and 7% for years 1 through 4, respectively.

Revenues and operating costs are expected to be constant over each year of the project's life.

What is the project's operating cash flow during YEAR 4?

Enter your answer in whole dollars (no cents) with no dollar signs or commas.

Equipment cost (depreciable basis): $80,000

Annual interest (on debt): $4,000

Annual sales revenue: $70,000

Annual operating costs (excluding depreciation): $25,000

Tax rate: 35%

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Answer #1

Year 4

Revenue $70,000

Operating cost (-)$25,000

EBITDA.    $45,000

Depreciation. (-) $5,600

EBIT    $39,400

Interest. (-) $4,000

EBT. $35,400

Tax (35%) (-)$12,390

Net income $23,010

Depreciation. (+) $5,600

Operating cash flow  $28,610

Note depreciation = 7% × 80,000 = 5,600

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