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Bedrock Bottling is considering a project for a new beverage called Cactus Cola. The project would require new assets today costing $200,000 that would be

Bedrock Bottling is considering a project for a new beverage called Cactus Cola. The project would require new assets today costing $200,000 that would be depreciated using 3-year MACRS Depreciation (yr 1: 33%, yr 2: 45%, yr 3: 15%, yr 4: 7%). Additional net working capital of $9,000 would be needed at the beginning of the projects life. The project has a 4-year expected useful life with an expected salvage value of $50,000 at the end of the 4-year expected useful life. Bedrock expects Cactus Cola annual sales of $140,000 and annual operating costs of $60,000 during the 4-year life of the project. Bedrock Bottlings marginal tax rate is 25% and their WACC is 9%. What is the year 3 operating cash flow for Cactus Cola?

A.

$37,500

B.

$50,000

C.

$90,000

D.

$67,500

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