Question
Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 2? The project
Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 2? The project would require an initial investment in equipment of 710,000 dollars that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 40 percent, 22 percent, 22 percent, and 16 percent, respectively. At the end of the project in 2 years, the equipment would be sold for an expected after-tax cash flow of 15,200 dollars. In year 2 of the project, relevant revenue associated with the project would be 460,000 dollars and relevant costs associated with the project would be 286,400 dollars. The tax rate is 25 percent.
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