Alternative OCF approaches

Next year, Byron Corporation estimates that they will have $425,000 in sales, $96,000 in operating costs, and their corporate tax rate will be 35 percent. Undepreciated capital costs (UCC) will be $375,000 and the CCA rate will be 20 percent.

- What is the estimated EBIT for next year?

- KN Jewelers purchased some land four years ago at a cost of $218,000. They spent $45,000 to raze the old building and clear the lot. Today, the lot is valued at $237,000 and produces an annual income of $22,000 from its use as a parking lot. KN has drawn plans to construct a new retail store on this land. The lot preparation costs will be $28,000 and the building will cost $229,500. What is the initial cost of this project? 237,000+28,000+229,500=494,500 - answer: $494,500