Question
Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 3? The project
Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 3? The project would require an initial investment in equipment of 820,000 dollars that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 42 percent, 26 percent, 26 percent, and 6 percent, respectively. At the end of the project in 3 years, the equipment would be sold for an expected after-tax cash flow of 18,300 dollars. In year 3 of the project, relevant revenue associated with the project would be 421,500 dollars and relevant costs associated with the project would be 274,200 dollars. The tax rate is 40 percent.
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