The Book Store is considering a new four-year expansion project that requires an initial fixed asset...

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Finance

The Book Store is considering a new four-year expansion projectthat requires an initial fixed asset investment of $2.8 million.The fixed asset will be depreciated straight-line to zero over itsfour-year life, after which time it will be worthless. The projectis estimated to generate $1.49 million in annual sales, with costsof $.79 million. If the tax rate is 40 percent, what is the OCF forthis project?

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3.8 Ratings (690 Votes)

Sales	$ 1,490,000
Less:
Costs	$ 790,000
Depreciation	$ 700,000	=2800000/4
EBIT	$ -
Less: Tax payable @ 40%	$ -
Net income	$ -
Add: Depreciation	$ 700,000
Operating cash flow	$ 700,000

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The Book Store is considering a new four-year expansion projectthat requires an initial fixed asset investment of $2.8 million.The fixed asset will be depreciated straight-line to zero over itsfour-year life, after which time it will be worthless. The projectis estimated to generate $1.49 million in annual sales, with costsof $.79 million. If the tax rate is 40 percent, what is the OCF forthis project?

The Book Store is considering a new four-year expansion project that requires an initial fixed asset...

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Finance

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