Quad Enterprises is considering a new 2-year expansion project that requires an initial fixed asset investment of $3.456 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 $3,072,000 in annual sales, with costs of $1,228,800. |
If the tax rate is 22 percent, what is the OCF for this project? |
Solution:
The OCF for the project year 1 = $ 1,817,856
The OCF for the project year 2 = $ 1,817,856
The total OCF for this project = $ 3,635,712
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
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