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# 7 You are evaluating a new project for Chet Holmgren, Inc. ( CHI ) . The project requires an initial investment of $ 5

#7 You are evaluating a new project for Chet Holmgren, Inc. (CHI). The project requires an initial investment of $550,000 which will be depreciated using the 3-year MACRS schedule (Year 1=33%, Year 2=45%, Year 3=15%, Year 4=7%). The project will increase revenues by $202,000 and will increase costs by $70,000 each year for the next four years. The project will be sold at the end of 4 years for $10,900. The project requires an increase in net working capital investment of $16,000 which will be recovered at the end of the projects life. The tax rate is 25% and the required return on the project is 10%.
What is the operating cash flow for the project in year 2?
Multiple Choice
$119,625
$99,000
$160,875
$144,375

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