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After a year of marketing research, 2Cups Inc. has decided to launch its new product. The equipment needed for the project costs $41 million and
After a year of marketing research, 2Cups Inc. has decided to launch its new product. The equipment needed for the project costs $41 million and will be depreciated using MACRS method and has a 7-year MACRS classification (table below). The project lasts 10 years. Estimated sales are $40 million a year. The annual variable production costs are 65% of sales. Cash fixed costs are $3.5 million a year. There are no other costs. The tax rate is 24%.
Year | 3-Year | 5-Year | 7-Year | 10-Year |
1 | 33.33% | 20.00% | 14.29% | 10.00% |
2 | 44.45% | 32.00% | 24.49% | 18.00% |
3 | 14.81% | 19.20% | 17.49% | 14.40% |
4 | 7.41% | 11.52% | 12.49% | 11.52% |
5 | 11.52% | 8.93% | 9.22% | |
6 | 5.76% | 8.93% | 7.37% | |
7 | 8.93% | 6.55% | ||
8 | 4.45% | 6.55% | ||
9 | 6.56% | |||
10 | 6.55% | |||
11 | 3.28% | |||
12 |
What is operating cash flow (in millions) for year 2?
Show your answer to the nearest 2 decimals.
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