Question 6 (of 10) .value 10.00 points Quad Enterprises is considering a new thr

Question

Question 6 (of 10) .value 10.00 points Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 million. The fixed asset will be depreciated straight-line to zero over its three-year tax with costs of $785,000. If the tax rate is 30 percent, what is the OCF for this proj intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) fter which time it will be worthless. The project is estimated to generate $2,090,000 in annual sales ect? (Do not round OCF References Difficulty: Basic Learning Object Worksheet

Explanation / Answer

Annual Sales = $ 2090000

LESS: Costs = $ 785000

EBITDA = $ 1305000

LESS: Annual Depreciation = Fixed Asset Investment / Number of Years = 2.73 / 3 = $ 0.91 million or $ 910000

Taxable Income = $ 395000

LESS: Tax at 30 % = 0.3 x 395000 = $ 118500

Net Income = $ 276500

ADD: Annual Depreciation = $ 910000

Operating Cash Flow (OCF) = $ 1186500

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