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Company ABC is considering a new three-year expansion project that requires an initial fixed asset...

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Finance

  1. Company ABC is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $2,110,000 in annual sales, with annual costs of $805,000. The tax rate is 35 percent and the required return is 12 percent. What is the operating cash flow (OCF) in year 1?

    A.

    $1,173,750
    B.

    $29,149.45
    C.

    $6,330,000.72
    D.

    $3,915,000.65

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