Question 6 Phone Home, Inc. is considering a new 6-year expansion project that r

Question

Question 6

Phone Home, Inc. is considering a new 6-year expansion project that requires an initial fixed asset investment of $5,994,000. The fixed asset will be depreciated straight-line to zero over its 6-year tax life, after which time it will be worthless. The project is estimated to generate $5,328,000 in annual sales, with costs of $2,131,200. The tax rate is 16 percent. What is the operating cash flow for this project?

$1,894,318

$2,515,482

$2,669,328

$2,845,152

$1,894,318

$2,515,482

$2,669,328

$2,845,152

Explanation / Answer

depreciation per year =5994000/6=$999000

So operating cash flow for this project=($5,328,000 -$2,131,200-$999000 )*(1-16%) +$999,000

=$2,845,152

ans:$2,845,152

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.