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 720,000 dollars that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 39 percent, 24 percent, 24 percent, and 13 percent, respectively. At the end of the project in 2 years, the equipment would be sold for an expected after-tax cash flow of 14,500 dollars. In year 2 of the project, relevant revenue associated with the project would be 311,100 dollars and relevant costs associated with the project would be 277,500 dollars. The tax rate is 20 percent.
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