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J. Childs Gourmet Pie Shop has the following investment opportunity: Pie machinery at t=0 costs $1,500. The cost of making pies is $350 at t=1,
J. Childs Gourmet Pie Shop has the following investment opportunity: Pie machinery at t=0 costs $1,500. The cost of making pies is $350 at t=1, t=2, and t=3. The pie machinery is depreciated straight-line depreciation to zero over 3 years. The market value of the pie machinery after three years is zero. Estimated annual sales are $950 at t=1, t=2, and t=3. The required return is 13%. The tax rate is 25%. Assume no working capital requirements. What is the OCF (Operating Cash Flow) at t=1? [6 marks]
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