Question

A company is considering a new 6-year project that will have annual sales of $198,000 and...

A company is considering a new 6-year project that will have annual sales of $198,000 and costs of $122,000. The project will require fixed assets of $241,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2?

Multiple Choice

  • $65,892

  • $63,817

  • $76,381

  • $52,061

  • $59,599

Homework Answers

Answer #1
Year1 2 3 4 5 6
Sales 198000 198000 198000 198000 198000 198000
Cost 122000 122000 122000 122000 122000 122000
Depreciation 48200 77120 46272 27763.2 27763.2 13881.6
EBIT 27800 -1120 29728 48236.8 48236.8 62118.4
Tax on EBIT@34% 9452 -380.8 10107.52 16400.51 16400.51 21120.26
NOPAT 18348 -739.2 19620.48 31836.29 31836.29 40998.14
Depreciation 48200 77120 46272 27763.2 27763.2 13881.6
cash flow 66548 76380.8 65892.48 59599.49 59599.49 54879.74
Depreciation caluclation
241000 cost 20% 32% 19.20% 11.52% 11.52% 5.76%
Depreciation caluclation 48200 77120 46272 27763.2 27763.2 13881.6
Option c is correct 76381
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