Question
Company A just started a 6-year project that costs $595,000 to purchase an equipment. The equipment will be depreciated following the 5-year MACRS schedule. According
Company A just started a 6-year project that costs $595,000 to purchase an equipment. The equipment will be depreciated following the 5-year MACRS schedule. According to the 5-year MACRS schedule, the depreciation percentage each year from year 1 to year 6 is 20%, 32%, 19.2%, 11.52%, 11.52%, and 5,76%, respectively.
The sales generated from the project will be $495,000 every year.
The costs associated with the project will be $335,000 every year.
The tax rate is equal to 35%.
Please calculate the project's OCF (operating cash flow) in Year 3.
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