Question

Quad Enterprises is considering a new 2-year expansion project that requires an initial fixed asset investment of $4.968 million. The fixed asset will be depreciated straight-line to zero over its 2-year tax life, after which time it will be worthless. The project is estimated to generate $4,416,000 in annual sales, with costs of $1,766,400.

  

If the tax rate is 22 percent, what is the OCF for this project?

• $2,613,168

• $2,482,510

• $2,649,600

• $2,743,826

• $129,168

Answer 1

operating cash flow (OCF) = $2,613,168